Would you trade your personal data for savings?
As more of our movements and actions are monitored and recorded, digital privacy has become a significant concern. If we were forced to face the amount of information some companies have on us, we would probably completely change our consumer habits. Instead, the vast majority of us choose to bury our heads in the sand and not think about it.
While consumers might be hesitant to give up personal information, they aren't necessarily opposed to it. Two main factors go into how willing consumers are to turn the other cheek when it comes to data collection-
How trustworthy is the company?
How valuable is the product or service the company provides to my life?
Millions have conceded to allow Google and Facebook/Meta to collect information on us, mainly because we find enough value in the services they provide in return. Clearly, neither of these companies score very high in public trust, but they are able to continue collecting our data because of the amount of value they create. While the piling distrust Facebook and Google face is hard to compete with, the insurance industry isn't doing much better. The insurance and financial industry constantly rank at the very bottom in consumer trust reports like the Edelman Trust Barometer below.
This lack of trust is a massive problem for legacy insurance agencies trying to adapt to a market overtaken by modern and agile insurtech firms. While there are numerous papers prescribing ideas for how the industry can bolster consumer trust, the biggest question for consumers remains, 'what is in it for us?' If insurance companies want consumers to give up their data, they need to offer vastly improved services and start making steps towards increased transparency. While trust might be difficult to build, almost every type of insurance policy can be massively enhanced by implementing AI and ML tools. Every form of insurance could be better, more personalized, and in many cases, less expensive for both users and the company if insurance providers could convince users to share their information.
Auto
Auto insurance was one of the first to recognize and implement monitoring technology and use that data to structure pricing. Many auto insurers will now offer reduced policies if they can put a little device in the car or tap into the users' cell phones to monitor driving patterns. If drivers reach a certain score by having safe driving practices (no rapid braking or accelerating, no overly tight turns), they can receive discounts on their monthly bill.
As long as you are not trying to start your career as a Fast and Furious double, this is one of the less invasive and more understandable trades of personal info for better service. If you are a careful driver, the potential savings can be rather significant. State Farm in the United States offers up to 30% discounts for safe drivers, and Progressive Auto insurance claims that drivers can save up to $146 a year. In addition to having information on how quickly you hit the brake for that stop light though, insurance companies also can use these technologies to know where you go and how long you were there. While sharing our data may come with benefits, many drivers still might be uncomfortable with the idea.
In addition to offering discounts, some auto insurance companies like Aviva in England go a step farther and aim to help you become a better driver. They do this through an app and gamification techniques, including competition theory, user comparison, and social network interactions. Rack up enough points, and you get to the next level of discounts. Or, if you're feeling extra confident, you can challenge your partner to a little competition and whoever gets the lower score has to do the dishes for the week.
Home
Monitoring devices in our homes are a newer phenomenon, and therefore possibly a bit more concerning for some regarding privacy concerns. Already we have seen some pretty grotesque examples of how home monitoring systems like the Ring can be hacked and abused. Because of incidences like this, many people are apprehensive about granting even more access to their home.
While home insurance companies might not give you discounts for living safely, they can still offer benefits. Connections to your smart home can detect when the smoke alarm goes off, and if no one is home, it can automatically set off the sprinklers and alert the fire department. Or, if temperatures drop down past a certain point, your insurance company could send you a warning that your water pipes are likely to freeze or burst. This kind of monitoring and notification system can be incredibly beneficial to both the homeowner and the insurance company. Payouts due to home damage are costly for insurance companies but never seem like enough for the homeowner.
Life/Health
Out of all of the different kinds of insurance out there, health and life insurance probably have the farthest to go in order to become broadly trusted or implemented. This is by no means because of the lacking of technology. In fact, with the surge of wearables in the last years, monitoring a user's general health is probably one of the most straightforward tasks. Most people, however, are far from ready to trust insurance companies with the amount of data that wearables collect. In addition to trusting insurance companies with data, there's also the concern of hackers being able to gain access to information like where you are, how long you have been there, or even your current heart rate. Just this week, the FBI got hacked, so it's easy to understand why consumers might not have a lot of faith in the digital security of some insurance company.
Once again, there is a potential benefit if users and insurance companies could reach an arrangement where both parties felt comfortable and safe with shared data. In 2016, Springbuk, a healthcare analytics firm, published a research finding claiming that employees using wearable fitness monitoring devices had an average of $1,292 lower healthcare costs than those in the control group over a two-year period. While we all might think we are not that easily manipulatable, we actually are. Gamification works incredibly well on most people. If you see you are just shy of making your daily goal or notice a friend or family member has accumulated more steps than you for the day, chances are you will consider taking the stairs instead of the elevator. When put together over time, these small behavioral changes can offer something much more valuable to users than a discounted insurance plan, better health.
Building better trust
While the benefits to users and policyholders are clear through better-priced policies and more personalized plans, there is a substantial financial incentive for insurance providers as well. Historically, insurance companies predicted risk categories based on available data from people with similar demographic data points. As you may suspect, comparing your driving or exercising habits to others who share certain demographical information might not be particularly accurate.
Better use of consumer data will improve policies, build consumer confidence, save both companies and clients money, and possibly even lead to better health and safety habits from users. With data, policyholders will be able to better understand their exposure to risks in their everyday life and act and adapt accordingly. If this change convinces even a percentage of users to drive safer or monitor their heart health a little closer, it's a success for both parties. To succeed in this new and changing market, insurance companies, over time, should focus more on prevention-focused products and services than on reactive services. After all, prevention is always better than a cure.
To read this article in its original publishing, click here