The headline might sound crazy, but it's not far from reality in 2021.
The insurance industry, catalyzed by new-age insurtechs, is experiencing a rapid transformation as personal data, predictive analysis, and technology replace in-person medical exams, face-to-face meetings, and lengthy application timelines.
If you have a tiny device attached to your car that tracks speed and hard stops so your auto insurance company can adjust your rates, you're part of the evolution.
Built In compiled a list of 21 big data insurance companies. Some examples:
- John Hancock: "Interactive" life insurance policies "would offer rewards to clients who let the company collect their health and fitness data through wearables like Fitbit as well as a proprietary app. On top of that, there would be extra rewards for healthy behavior."
- Vitality: The London-based insurer "amasses big data on consumers through the “Vitality Age” calculator as well as through wearables and affiliate organizations like gyms and grocery stores. Those affiliations help the company ensure that users are complying with their wellness plans by documenting clients' activity and eating habits."
- Aetna: After being purchased by CVS Health, the insurer can now "track unfilled prescriptions — a costly problem termed “medical non-adherence”— and craft more robust public health initiatives for at-risk groups."
An invasion of privacy or a positive transformation to deliver more accurately priced policies and identify overinsured consumers?
Breeze, an insurtech ourselves, surveyed 1,000 adult Americans to gauge public opinion.
Most Americans oppose big data in insurance, but there's a massive age divide
Should insurance companies (life, health, auto, disability, etc.) be allowed to use big data (personal health data, consumer purchases, internet browsing history, social media usage, etc.) to determine your insurance policy pricing?
Of note is the massive age divide.
Younger consumers have grown up in the age of the internet, cookies, data harvesting, and the interconnectivity of it all. These things are more normal to them than they are to previous generations, hence the results by age.
Yet still, it's interesting the majority of Americans are against big data in insurance because, well, it’s already happening.
But would they still oppose big data in insurance if it led to cheaper premiums?
Here's when public sentiment sways just a bit.
For cheaper insurance, what would people allow from insurance companies?
Poll participants were given nine hypothetical situations in which they had to allow an insurance company to use the respective data-collecting practice on the chance it may qualify them for a lower cost policy.
Here's how they answered:
- 55% would be OK with an insurance company having them wear a biometric tracker (Fitbit, etc.) to track their health & fitness data
- 53% would be OK with a pet insurance company tracking their pet's activity & eating habits
- 52% would be OK with an insurance company having them install a tracking device to their car to monitor driving activity & safety
- 52% would be OK with an insurance company monitoring their in-home equipment (Nest thermostat, carbon monoxide reader, etc.)
- 51% would be OK with an insurance company monitoring their pharmacy prescriptions & other medical adherence behaviors
- 42% would be OK with an insurance company accessing & analyzing their DNA
- 42% would be OK with an insurance company monitoring their consumer activity & purchases (grocery receipts, gym activity, Amazon purchases, etc.)
- 34% would be OK with an insurance company installing a camera in their home to monitor their everyday activity (eating, exercise habits, etc.)
- 34% would be OK with an insurance company monitoring their internet & social media activity
Of the nine hypotheticals, there are five in which the majority of consumers are OK with the insurance company doing the respective data-collecting practice because it may qualify them for a cheaper insurance policy.
It might be more surprising over one-third of respondents are OK with an insurance company either installing a camera in their home or monitoring their internet and social media activity. That's substantial.
It's again worth noting that many of these hypotheticals are not far-fetched.
We've got electric carbon monoxide readers and Nest and all these other things that are monitoring all this data and so, what do we do with it? How do we capitalize on it?
Built In also talks about Root, State Farm, Progressive, and Safeco, who have all introduced technology that track things like sharp turns, acceleration, and driver frequency to deliver more accurately priced auto insurance policies.
Then there's Haven Life, who prices policies based on an applicant's MyLifeScore360, a mortality risk metric. From the article:
It's calculated based on 48 variables — including family medical history and lipid intake — that emerged as significant when the company analyzed hundreds of thousands of MassMutual life insurance policies dating back 15 years.
If you're interested in seeing these results broken down by age, check out the graphic below and cycle through the tabs to see results for each hypothetical.
Respondents 55 & older were always the least receptive to any of the hypothetical situations, with the exception of one – installing a tracking device to their car.
45% of respondents 55 & older were willing to do this compared to just 36% of respondents ages 18 to 24, which is perhaps a testament to how our driving habits change with age.
Note: If you'd like to see the raw data or data broken down by state, gender, race, age, etc., please email me at [email protected]
What is a bigger threat to your personal privacy?
If there's one sector that has excelled at leveraging big data to make smarter business decisions, it's internet companies running targeted ads, namely social media companies.
On that note, we asked the following question to our 1,000 poll participants:
What is a bigger threat to your personal privacy: Companies accessing your personal data to run targeted ads (i.e. Facebook) or insurance companies accessing your personal data to determine your policy pricing?
Here's how the answers broke down:
- 20% answered "companies accessing my personal data to run targeted ads."
- 22% answered "insurance companies accessing my personal data to determine my policy pricing."
- 49% answered "both are equally threatening."
- 7% answered "I am not threatened by either."
- 3% answered "not sure/I'd rather not say."
It was interesting to see more consumers feel threatened by insurance companies using data to price policies compared to companies using personal data to run targeted ads like the ones you see on Facebook. Although, the plurality felt equally threatened by both of these.
More interesting was just 7% did not feel threatened by either, indicating most consumers feel some level of stress by the lack of privacy in 2021.
Insurtech vs. insurance
The insurance industry has forever been dominated by giant, incumbent carriers with deep pockets and strong insurance ratings.
But things are changing quickly in 2021.
Easier to use, digital-first insurtechs are slowly taking up market share, or in some cases, being bought by legacy carriers.
To capture this competition, we asked a series of four questions.
The results to two of them show consumers still largely trust incumbent insurance companies over new-age insurtechs.
The legacy insurance companies hold a distinct edge when it comes to trust (Q1), which in turn keeps them first in mind when consumers are thinking about buying insurance (Q2).
However, the next two questions show insurtechs might have two advantages they could capitalize on: more accurate pricing & ease of use.
20% of consumers would trust an insurtech to deliver more accurate pricing over a traditional insurance company (Q3). This isn't a substantial jump from the 15% of consumers that would trust an insurtech over a traditional insurance company when buying a policy (Q1).
But, it's a jump nonetheless and shows the data-intensive underwriting techniques of insurtechs are holding some water with consumers, which is something to build upon.
More telling, the majority of consumers want to buy insurance online and without a medical exam, even if it means paying a higher premium (Q4). Ease of use is the value proposition for insurtechs.
They need to keep marketing this: skip the medical exams (if you’re eligible) and face-to-face meetings by buying your insurance policy completely online.
The age breakdowns for all four questions also tell a deeper story as younger Americans are more ready to use insurtechs when compared to older Americans — a great sign for insurtechs as these consumers are the future.
We rounded up some thoughts from insurance industry insiders and experts on what the emergence of insurtechs and big data means for the industry.
Kristopher Marsh, an insurance & risk management professional and the editor of Discover D&O, talked about how the changes should lead to lower rates and a better buying experience, but also impact how insurance companies will service their customers:
Many insurers are now able to move away from labor intensive underwriting practices, to using data, machine learning, and automation.This transition is proving to be very powerful, policies are able to be underwritten using a portfolio approach, whereby rates and conditions can be set and adjusted by a centralized team in charge of strategy. This favors fewer better qualified underwriters in senior positions and reliance on more cost effective labor in customer service positions adhering to strict guidelines on what decisions can be made at the local level.Over time, this should lead to lower rates, improved customer service, and a better buying experience overall. However, from a consumer perspective, this does not help with respect to seeking advice, which is not suitable for automation and remains best facilitated by a qualified professional.
Michael Ell of Wise Dollar Insurance also spoke on how insurtechs might be reducing the human element of the industry:
You will pay more for an AI-generated decision. You are paying an additional fee for the technology and the faster decision. And if you have health issues, a broker can't advocate for you, which potentially means paying higher premiums.
And finally, Sarah George of Finder discussed many of the same topics we touched on in the section above, in addition to the juggling of privacy concerns with big data:
Overall, the insurance market is dominated by a handful of companies, which shows that customers may trust major brands over newer startups.But there’s plenty of space for these insurtech startups. Reports like J.D. Power’s insurance studies show that customers have high expectations for digital experience. Insurtechs have a leg up because they often simplify the buying process, helping people get protection quickly without a mile-long application.If AI technology is set up well, it can be a win-win for customers and insurance companies. Customers can get accurate quotes without a long application, and insurers don’t have as much manual underwriting work to do.The one downside is that many are concerned about privacy when giving out their sensitive information. I’d love to see insurance companies cater to data privacy concerns as they come out with new technology or AI-powered products.
Overall, insurtechs are a positive development for the industry as they are making the application process easier, more accessible, and more accurate. However, they have some way to go before competing with legacy carriers, and must also adopt best practices for the handling of sensitive data, in addition to the handling of those inevitable issues that only a human's touch can solve.
Furthermore, incumbent insurance carriers would benefit by collaborating with insurtechs, not competing against them. The opportunities for both sides to work together through acquisitions, investments, and partnerships are endless and would benefit both the industry and consumers.
All data found within this report derives from a survey commissioned by Breeze and conducted online by survey platform Pollfish. In total, 1,000 adult Americans were surveyed. The appropriate respondents were found via Pollfish’s age filtering feature. This survey was conducted on August 16th, 2021. All respondents were asked to answer all questions truthfully and to the best of their abilities.
Note: If you'd like to see the raw data or data broken down by state, gender, race, age, etc., please email me at [email protected]
Underwriting disability insurance
Breeze is an insurtech. We have built insurance technology that makes it easier to apply and underwrite supplemental insurance products like disability insurance. Using Breeze's completely online platform, consumers can complete the application process in about 10 minutes. Eligible applicants can skip the medical exam.
The cost of disability insurance depends on underwriting factors like your occupation, age, gender, and health history. For example, a pre-existing condition will impact your eligibility for disability insurance, whether that means you are excluded from certain benefits or you are denied altogether.
It's not just pre-existing conditions and other health issues that could impact your disability insurance eligibility. You could be denied disability insurance if you work at a risky job, participate in dangerous activities, or have a poor driving record.
If you're interested in learning more, check out this guide: What is Disability Insurance?