Data Mining in the Insurance Industry

Data mining can be defined as the process of selecting, exploring, and modeling large amounts of data to uncover previously unknown patterns. In the insurance industry, data mining can help firms gain business advantage. For example, by applying data mining techniques companies can fully exploit data about customers’ buying patterns and behavior and gain a greater understanding of customer motivations to help reduce fraud, anticipate resource demand, increase acquisition, and curb customer attrition. This paper discusses how insurance companies can benefit by using modern data mining methodologies and thereby reduce costs, increase profits, retain current customers, acquire new customers, and develop new products.