Personal data is arguably the most valuable asset of any Insurer. Collecting, analysing and gaining insight from the frighteningly huge amounts of available personal data has long been feted as the route to real disruption in the insurance market. There are many examples in the UK of companies, such as Vitality Life, using data to personalise their Life and Health protection insurance products. Up to now there has been a notable reluctance for this approach in the US…is this about to change?
Will America be the catalyst?
This month, news emerged that one of the oldest and most established American Insurer, John Hancock, has re-engineered their product offering in favour of “interactive life insurance”. Basically, policy holders are encouraged to share personal data on their health and lifestyle with the company, typically from wearable devices such as Apple Watch or Fitbit.
Customers can then obtain John Hancock policies to take advantage of their activity and health data. If they opt-out, customers are likely to miss out on certain offers or discounts.
There are of course detractors, with the main concerns around privacy and how far we can trust data from ‘wearables’. These are valid concerns, together with the fear that interactive insurance policies could ultimately exclude the significant number of vulnerable people who are not data savvy or do not have access to a relevant wearable device or a smart phone.
The debates will continue to rumble on, with merits on both sides of the argument. Ultimately, scale will be the deciding factor. Interactive life and health insurance products are indeed popular in the UK, but they are still not mainstream. In the same vein, telematics data is used to influence some motor insurance pricing but such policies still represent a relatively small market share. Ultimately the UK market is relatively small in comparison to the US, so what happens in America will be a big influence for the future.
Are customers interested?
So, is there a market for insurance that is priced using personal data? The answer appears to be ‘yes’. A recent survey by Mulesoft involving more than 8,000 people found that almost half of insurance customers are happy for Insurers to use data from social media and health monitoring devices in return for cheaper premiums Seemingly a proved appetite for change.
So, given that there appears to be a real market for personalised insurance products based on the individual’s data, why are Insurers not responding more quickly? I suggest there are a multitude of reasons; a couple have been touched on previously. Undoubtedly though, technology constraints will be a factor. To turn data into valuable business insights requires upgraded systems. Before data can play a more important role for Insurers, they need access to modern channels and technologies. Only then will data really start to transform the insurance market.