The beginner’s guide
by Becky Baker
Any organisation that stores data recognises its responsibility to comply with regulation after the recent introduction of GDPR. Customer privacy is a key issue for businesses using big data analytics. Organisations in highly regulated sectors such as banking and insurance must reach an even higher threshold of data protection, and recognise both the opportunities, challenges and risks that big data can offer.
So, what is big data?
Information that in the 1960s would have been stored in overstuffed filing cabinets can now be collected and stored digitally in vast quantities. Computerized databases, cloud technology and the internet of things mean we can now produce and store more information than ever before.
The term ‘big data’ has evolved to encompass the concept that all data can be potentially correlated to generate a highly detailed and complex picture about any individual, place or thing.
In a nutshell, big data is very powerful but there is a cost:
- Volume: The sheer amount of data being produced is a challenge to manage. Cloud technology and huge data centres can store vast quantities of data but they require enormous resources. The carbon footprint of global data centres in places such as Oregon and Virginia is greater than the carbon footprint of the entire global aviation industry.
- Velocity: Data arrives at breath-taking speed and its value depends on it being processed and acted on quickly. When you ask Alexa to buy more loo roll, she needs to recognise the fact you’re talking to her, work out what you’re saying, respond, and actually buy the loo roll all in less time than it takes you to spin the roll.
- Variety: Having a wide variety of data types is challenging because it is harder to derive meaning from some types than others. If you can’t extract meaning from the data, it has no value. Text, audio and video data are common examples of data that need extra processing to understand their value. For example, when you asked Alexa to buy loo roll earlier she had to receive your audio data, convert it into text, and interpret the text before she could understand its meaning and take action.
These characteristics are known as the ‘three Vs’ of big data.
The information that Alexa collects as you talk to her every day is a good example of how valuable data can be to businesses and their customers. Amazon can build a detailed picture of your shopping habits and preferences and you receive more relevant recommendations and hopefully a better service (as long as it’s not your toddler ordering a small arsenal of Nerf guns).
Big data is used across a huge range of industries to understand user behaviour and boost customer satisfaction. Although retail is a key example, any organisation that manages complex processes with a high number of users can draw value from big data.
UPS used big data analytics to redesign its delivery routes in the US, reducing its drivers’ daily routes by 85 million miles, and security services across the world are hugely reliant on big data to identify terrorist and other security risks. The health industry is investigating how to harness the power of big data for better patient care. The potential applications of the technology are vast, from preventing fraud and money-laundering to betting on the football score.
Big data and the law
Big data can be used to serve the customers’ interests as well as being of great value for businesses, but GDPR is just the forerunner of how tightly regulated this area must be. The Financial Conduct Authority has already expressed concern that the use of big data analytics could lead to altered business practices that don’t necessarily benefit consumers, and it continues to encourage people to join the ethical debate.
Forging ahead with big data analytics and mining its benefits will always be a delicate balance between innovation and consumer protection. In this ever-evolving arena, organisations who fully embrace and understand both the challenges and opportunities within the developing regulatory structure will have a huge advantage but it’s very early days. In the words of Charles Randell, Chair of the FCA, “there is so much more thinking to be done”!
One lawyer who is doing the thinking on big data is George Barratt, a newly qualified solicitor at RPC. The firm is known for its broad range of insurance work, and Barratt focuses on professional and financial risks insurance claims.
The insurance industry is a good example of a highly regulated sector that has a lot to gain from big data. Barratt highlights that “data has always been at the heart of what insurers do”, but the use of big data has the potential to transform the core of the industry:
“The claims process is an area which is ripe for innovation, particularly in the way it interacts with the underwriting side of the business. By capturing and using claims data, insurers can reduce, predict and sometimes even prevent losses by identifying risk factors.”
Barratt acknowledges that compliance with regulation such as GDPR is a challenge, but he highlights that it can also be an opportunity. Insurers who remain ahead of the regulatory curve will have a competitive advantage, advised of course by their data protection lawyers.
Barratt sees competition as the other big challenge for insurers, especially from new players in the market:
“Small start-ups can develop new products much quicker than larger insurers, who can be held back by the sheer size and scale of their operations. Amazon and other tech giants are also keen to get a foothold in the insurance industry and have vast experience in using big data.”
Staying competitive in this market will be challenging for established insurers with large international operations, but Barratt draws parallels between insurance and banking in their response to technological disruption. Some larger banks have forged effective relationships with more agile FinTechs, and Barratt believes “this will also be crucial for insurers”.
For lawyers and students, it’s worth keeping up-to-date with what’s going on in the big data world. In insurance, Barratt stresses that it’s still early days and ideas are developing all the time:
“Nobody is sure which ideas and concepts will take off and which will fall away, so it’s important to have an overall view of what’s going on in the market and to view new ideas critically.”
Barratt encourages the next generation of lawyers to take advantage of their native tech-savvy to gain a foothold in this fast-developing area. Lawyers will play a key role in shaping the legal framework of big data, and its wide application, from tax to education, means that everyone will be getting involved.
By Becky Baker (@rebeccaJKBaker)