Disruptive technologies are taking industries by storm, and the insurance field isn’t spared either. Emerging “insurtech” startups are pushing from one side while tech giants like Amazon are pushing from the other. This leaves established insurance companies with no option but to adapt to the transforming industry landscape.
Since 2012, more than $8 billion has been invested in insurtech, and everyone is asking what this rise in technology means to the consumer. The Internet of Things, Blockchain, and Artificial intelligence have the potential to make work simpler for insurers and policyholders. In the future, consumers will take nothing less than a policy that is tailored to meet their specific needs affordable and easier to underwrite. However, as users enjoy more personalization, the problem of data privacy and security arises.
WHO ARE THE BIGGEST BENEFICIARIES OF IOT DEVICES?
The Internet of Things (IoT) provides great opportunities for insurers. Traditionally, the underwriting process for life insurance relied basically on indirect indicators like age, occupation, and gender. Today, insurance companies have access to a myriad range of data generated from wearable devices like Fitbit and Apple Watch, which are gadgets connected throught the IoT. The devices give insights on personal data such as the policyholders’ lifestyle, exercise frequency, diet, sleep quality, and much more for accurate risk assessment.
Many insurance companies are already switching from traditional policies to the more advanced interactive life insurance. They encourage policyholders to wear Apple Watches in exchange for enticing perks and discounts. For example, if the device indicates a good overall health, the customer can enjoy a smaller premium collected in the lifespan of the policyholder.
However, this paradigm shift is not without downsides. The biggest weakness to IoT devices is privacy and security. Last year, the Strava Fitness Tracker was reported to have revealed a secret [US military bases](US military bases) due to the locational signals from a cadet’s wearable tracker. This indicates how dangerous poor data management can be. The same applies to policyholders’ IoT health monitors - their personal data automatically collected from technology is prone to leakage, hacking, and misue, among other other forms of human error.
HOW PRICY IS YOUR DNA TEST?
DNA testing is becoming increasingly popular and affordable. Whether you’re testing for a genetic illness or investigating ancestry, DNA testing carries universal significance across cultures. But, little do people know there’s a dark side to the practice. The pharmaceutical giant GlaxoSmithKline spent a whopping $300million to purchase 23andme’s genetic test database, which explains why DNA testing kits are becoming unusually cheap - money is being made elsewhere.
Insurance companies are keen to obtain data insights from consumer DNA tests. Why? ‘Bad genes’ is good reason for a higher premium. Life insurance companies now ask about your DNA test results during the underwriting process, and individuals born with a higher genetic risk factor are given extremely costly plans compared to their heathier counterparts. Whether this practice is fair is still a controversy as nurture plays an equally important role in the person’s health as nature. Customers argue that a high premium based solely on genetically disadvantages is both unfair and a violation of privacy.
INSURERS CREEPING ON SOCIAL MEDIA ACCOUNTS
With the proliferation of social media, our lives are no longer private. Beyond our trusted friends and family, employers, colleagues, advertising agencies, and now even your insurer are likely your stalkers. The State of New York has actually authorized insurers to snoop on the accounts of to-be policyholders before determining their premiums. Since most countries have not established legal boundaries on social media activities, insurance companies are free to take advantage of these grey areas to snoop, judge, and profit.
Insurers snoop because they have vested interest in what goes on in your life. First, they may want to detect any element of fraud. For example, you may post pictures of you and your friends on a hiking expedition yet you’re supposedly suffering a fractured limb - it’s a bad look. Secondly, your social media activities can help in predictive modeling during the underwriting process. Using AI, your insurance company can draw information about who you are from your social media account in seconds. Again, the availability of this technology encourages privacy breaches and leads to heaviliy discriminatory behavior in policy underwriting.
INSURTECH IS ANOTHER TRADE-OFF
There is no doubt that Insurtech is here to stay as it gives the insurance industry the potential to thrive and become more efficient by providing flexible, tailor-made, and affordable policies. However, the new conveniences don’t come for free. The trade-off comes in our data security and privacy. Is it worth it? You decide.