The use of big data and analytics, and other innovative technologies, is transforming the way the insurance business is being conducted. This article describes some of the changes that are occurring and how regulators are attempting to keep pace with them. It argues that the current regulatory framework is robust and that regulators should be careful not to stifle innovation by creating new burdensome regulations. Rather, they should seek to support efforts to innovate, so that insurers can bring valuable new goods and services to the marketplace.

Definitions vary, but for purposes of this article, “big data” means the vast amounts of data used in connection with software programs, algorithms, and artificial intelligence to improve the way insurers provide products and services. Big data includes data that insurers already have from conducting their businesses—for example, from insurance applications, policy administration, and claims records. Some of this data can be newly accessed and analyzed using fresh technologies. Big data also means external data, which can include sources that insurers have used for many years, such as motor vehicle records and credit reports from credit rating agencies. It also can mean new sources that reflect an insured or applicant's lifestyle. This latter type of big data is collected from a wide variety of sources, including social media posts, public records, mobile device usage, among other sources. Insurers vary in what data they use and the ways in which they use it.

Insurers are looking to innovate. Last year, $1.7 billion was reportedly invested in “InsurTech.” This year's spending is expected to far exceed that level. This innovation is being driven by technological advances, and the corresponding marketplace expectation that products will improve and be delivered faster and in more consumer-friendly ways. Insurance is viewed as lagging behind other industries in terms of offering products and services for the new internet-based and mobile economy that better caters to all consumers—but, in particular, to millennials. Insurers are using new technologies, including big data and analytics, to improve their marketing and distribution, underwriting, and claims processes, among others.