Better futures in insurance – can we have too much data?
06 Feb 2019
We live in a world with an ever growing amount of data. There is no shortage of devices and apps which tell us how much healthy activity we have done, how well we have slept, and any other factor of your life you care to track! But when it comes to insurance, is having all this data really a good thing?
On one hand, the more data that an insurers has on a person, the better they can understand and price the risk. That sounds appealing if you are living a very healthy lifestyle and in the market for some life insurance. But what if you have a pre-existing condition, such as type II diabetes? All this extra data means you could be charged a premium, or even declined insurance entirely.
Could this race to capture more and more data create ever smaller pools of risk, in the process cancelling out the pooling effect that underlies the principle of insurance?
So far we have seen new data sources, such as wearable devices and blood glucose devices, used to better understand insurance customers. Innovative new insurance products have then utilised this information to reward customers for getting active or managing their type II diabetes. The data has been used in a positive way to reward healthy behaviours, not to penalise or restrict access to customers. But will this always be the case?
The other challenge is information asymmetry. Some new data sources like genetic tests cannot be used by UK insurers in pricing. But the fact customers can know so much more about themselves than the insurer could lead to increased selection risk.
How will the insurance industry manage these risks? Do we need greater regulation in the future? And what do customers expect anyway? Are customer’s comfortable sharing data with insurers? It’s an area that clearly generates lots of questions.
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Hymans Robertson has a wealth of knowledge in applying innovative technology in the development of new insurance products. Our consultants would be delighted to support you. If you would like more information or advice, please get in touch.