Internal data can include information collected when writing policies, historical claim and payout statistics, and actuarial tables built over time. External data can include everything from traffic patterns to demographic profiles to inflation and other macroeconomic variables. (Credit: Freedomz/Shutterstock)

Data has become the world's most valuable resource. And the hunt is on.

Companies across all industries compete for information in order to gain an edge in the way they conduct business. Five of the most valuable companies in the world — Apple, Alphabet, Microsoft, Amazon, and Facebook — are largely entrenched in the data industry.

This influx of data across sectors has led to firms seeking new ways of receiving information to gain an advantage. On Wall Street, this is highlighted by the phenomenon of alternative data.

Hedge funds, investment banks, and asset managers have always sought an information edge to better their investment strategies. The difference is that they are now scouring nonfinancial data in order to do so. And while sophisticated quantitative hedge funds originally led the pack, alternative data has made its way to the mainstream. Experts now predict that alternative data will be a $7 billion industry by next year, with over $1 billion expected to be spent on data this year alone.

Ironically, Wall Street and other industries are only now catching up to what the insurance industry has known and practiced for decades.

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