Advancement in the insurance industry has been hampered by a lack of investment industry-wide in data warehousing and data mining technology. In their absence, product designers must work with limited detailed data about policyholders and claim histories. Instead, they rely on data summarizations (actuarial tables summarize data), supplemented by intuitive "hunches," to guide the development of new policy products, creative rating structures and appropriate pricing.
In addition to constraining new product design, the lack of data warehousing in the insurance industry also impairs the successful marketing of what few new policy products are introduced. Furthermore, these policy products, which are based on summarized information and intuition, potentially increase risk for the agent, the carrier and the reinsurer.
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