Insurtech utilizes technology innovations to enhance savings and efficiency in the insurance industry. Challenges from emerging Insurtech startups and industry giants like Amazon has forced insurance companies to quickly adapt to the changing industry landscape.
Since 2012, more than $8 billion has been invested in Insurtech, which tells a lot of how new technologies affect consumers. Artificial Intelligence (AI), the Internet of Things (IoT), and blockchain have the potential to disrupt the insurance industry by making things simple for both insurers and policyholders. Moving into the future, people will be looking for insurance plans that are tailored to their needs, cost-effective, and faster to underwrite. But, personalization is a double-edged sword. As much as Insurtech improves access to data that is more individualized than ever, it raises concerns about data security and privacy.
Who’s secretly taking advantage of your IoT data?
The Internet of Things has become a gold mine for insurance companies. Previously, underwriting life insurance relied mostly on indirect indicators like policyholder’s age, occupation, and gender. Today, wearable IoT devices such as Fitbit or Apple Watch can give insurers specific insights into your lifestyle, for example, how much you sleep or how often you exercise. These are more valuable data that ensure a more accurate risk assessment.
Healthier customers means more premiums collected over the extended lifespan of the policyholder. It’s not surprising that some insurers have opted out of the traditional policies and focus on interactive life insurance that relies on data from wearable devices. It’s not mandatory to grant access to your Apple Watch but insurance companies are navigating this challenge by offering discounts and perks.
Unfortunately for consumers, wearable devices come with issues to do with security and privacy. The controversy surrounding the Strava fitness tracker that revealed the location of US military bases is a demonstration of how poor data management can be disastrous. Data is the new currency but the sensitive information gathered by wearable devices is prone to misuse. Even if we can trust third-party entities with protecting our data, many privacy advocates still wonder why insurance companies want a 24/7 stream of information from policyholders.
The Real Price of a DNA Test
DNA testing is an affordable and popular way to get critical information about people. You can test for genetic diseases or even investigate your ancestry. However, there is a dark side to this process that seems innocent. DNA testing kits are surprisingly affordable, meaning that the money is made elsewhere. For example, GlaxoSmithKline, a famous pharmaceutical company, bought access to 23andme’s database of genetic test results for a whopping $300 million.
Insurance companies have lately taken interest in data insights from DNA tests, especially when dealing with health insurance. People seeking life insurance policies are required to give all medically relevant information, including genetic test results, during the underwriting process. This practice could likely lead to biases, with some people getting extremely expensive policies and others being denied altogether due to their test results. Critics have also pointed out that DNA tests show predispositions for sicknesses the policyholder might never suffer from, which puts customers at a disadvantage when carrying out a risk assessment.
Is Your Insurer Trailing You on Social Media?
Anything we post on social media is no longer a secret, but the list of potential stalkers on these sites has expanded and you need to add your insurance company. The state of New York has officially allowed insurers to use the information gathered from customers’ social media accounts to determine their premiums. Most countries have, however, chosen to offer very little legal guidance on this issue, leaving a grey area for insurance companies to take advantage of.
Now, your insurer will stalk you on social media for a number of reasons, and fraud detection is on top of the list. If you post pictures of your hiking expeditions while you’re supposedly suffering a broken leg, you might land into trouble. The second reason is predictive modeling during the underwriting process. Insurers can easily analyze your social media footprint within seconds by utilizing AI technologies. This practice also poses a privacy breach and discrimination when underwriting policies.
Insurtech is Another Trade-off
There’s no doubt that Insurtech is here to stay and has the potential to make insurance plans more consumer-friendly, flexible, and cheaper. However, that doesn’t mean that the attractive conveniences come free of charge. In the case of Insurtech, the trade-off could be our data security and privacy.