Privacy issues vs. Insurance Cost savings:

After I posted an article about Collecting Data to leverage for insurance purposes, I received comments and emails about Privacy issues vs. Insurance Cost savings.  This is a concern for many people and it is completely understood.  There is definitely a trade-off between sharing personal information vs. privacy and all it affords.

The question

I’ve rephrased the question as there were a few different versions but this is a paraphrase:

Thus far, many insurers have not been able to translate increased data or technology into savings for insurance customers.   So why should customers risk sharing this data with insurers with only the downside risk of it becoming compromised by a security breach?

This is the problem that needs to be addressed by the industry…

Insurance Industry

An industry focused on data and statistical analysis for the last 200 years but is struggling to keep up with data collection, why?

The ability to collect data and rate of growth of data sources has insurers struggling to catch up due to the rate of growth of bio-metric, vehicle, and consumer data.  Insurance isn’t alone, but is one of the later adopters of change.


Consumer concerns

As noted by Roger Peverelli in a LinkedIn post, “To many consumers big data equals big brother, and insurers that think of using personal data are not immediately trusted. Quite understandable.  Most data initiatives of insurers are about sophisticated pricing and risk reduction really. Cost savers for the insurer.”

The importance of privacy of data and protection of this personal information needs to become the utmost concern if insurers intent on using and collecting.  The long term security and risks associated with cyber hack are concerning.  But please note, more insurers or third party vendors will collect this data to start making insurance underwriting decisions- I can promise you that.   See our discussion about insurers who don’t use advanced data and analytics to make underwriting decisions (those dinosaurs still seeking Scale for Scale sake).

Data Use

This is why I am suggesting to balance the playing field.   At this time there is a unilateral advantage to use the data for your own benefit, because at the end of the day the information is yours and yours alone.  It is a unilateral benefit at this time because insurers are not requiring it and after bench-marking your health, driving record, etc. you have the ability, in advance of sharing with your insurer, to determine if your data is favorable towards your risk, highlights your risk management efforts, and proves you are best in class risk.   Ultimately, lowering/improving your Insurance costs, adding coverage, adding limit, etc.

These privacy issues will be fast growing concerns, especially in the wake of cyber attacks of insurers looking to compromise health insurers data.  There will be people who elect not to share this information and data due to privacy concerns, there will be those who don’t care, and those who judiciously share information only when it is to their benefit.

Questions for Consumers

  • What type of data would you be willing to share?
  • What type of information would you not like an insurer to have?
  • Will you evaluate insurance companies based upon their ability to protect this information?
  • What savings will be worth it to share additional information?

Questions for Insurers

  • How will insurers protect the data?
  • How will insurers underwrite the new data sources?
  • What data will be significant and what will be noise?
  • Will Increased data sources slow the speed of the transaction?
  • How will data retention and security costs change? How about record retention policies?
  • What type of interfaces will be built to allow insurers to utilize this data?
  • Will new regulation be introduced around this data protection?

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Arnold Smith

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