Insurance has always been an industry predicated on data. A significant portion of the recent changes the insurance world has been undergoing are due, in a large part, to the influx of data that the last decade has brought with it. The age of the internet and smart devices continues to provide insurers with an unprecedented amount of data. Data that you yourself may be providing without even realizing it.
A recent report by the New York State Department of Financial Services, a major regulator, revealed that life insurance companies are allowed to use information that they glean from social media accounts to inform policy costs. Naturally, the department went out to make clear that insurers can only use social media information in a manner deemed to be non-discriminatory.
So what exactly are insurers looking for? They are looking for social media posts that provide insights into the type of lifestyle that you lead. For example, if you are posting pictures of yourself exercising all the time, you might actually get a cheaper premium. Conversely, if you are posting photos of yourself engaging in risky behaviour, like skydiving or motorcycle racing, you might end up paying more for a life insurance policy.
“The insurer must establish that the external data sources, algorithms or predictive models are based on sound actuarial principles with a valid explanation or rationale for any claimed correlation or causal connection,” said the department in their report. That basically means that if an insurer can use data to prove that some kind of online behaviour lead to a shorter life, then that can be a determining factor in life insurance costs.
The New Yorker commented on this news, writing that:
“This approach sounds reasonable at first blush, less so when we consider that actuaries may eventually figure such things out. If there has been a lesson in our short, inconstant flirtation with big data, it is that high-volume processing of personal information rarely rewards consumers in the end—and that, in general, we’ve been much too eager to cede this territory in the interest of cheapness and efficiency.”.
We are living in the world of nearly unlimited data. That amount of information out there about everyone is going to change every industry in someway, but the insurance vertical does seem to be experiencing drastic changes early on. The lesson to be learned here? Be careful what you post online, it could cost you.