This guest post was contributed by Duncan Minty, an ethics consultant specialising in the insurance market.
Insurers have always wanted to know lots of things about the people applying for a policy, so any trend that simplifies that is bound to be good, isn’t it? My first inclination would be to answer yes, but at the same time, I would then wonder what has changed.
Has insurance become simpler? That would be great, but seems a bit unlikely. Or are insurers obtaining the information they need from other sources? That seems more likely. After all, the much talked about digital era has resulted in huge amounts of data being created about how we shop, where we travel, what we ‘like’, etc.
And all this data is collected so that firms can tailor prices and products, and anticipate the services we need. This is great – think of a car that tells the breakdown service that you need help, before you’ve even found where you put your mobile phone.
All this data is shared as well, so that your insurer will learn from the supermarket what you buy and how often. What this adds up to is an insurer who puts together a picture of you from a myriad of sources. As a result, that picture will be very detailed, to the point that a label like ‘in his mid 50s’ becomes meaningless. After all, I may be 56 years old, but I’m not like the many thousands of other 56 year olds. I’m me, and the insurer is getting to know me very well.
It’s a double sided coin though. On the one side, this much more personalised approach means I won’t be treated like any other 56 year old. My motor insurer will know how much safer I drive than other 56 year olds. And if I wore a health tracking device, they’ll know how much healthier I am too (hopefully!).
The other side of that coin is darker. The insurer will know if I’m not much of a risk taker and so price my premium a bit higher, knowing I’ll probably pay extra for that piece of mind. And if the amount of fruit and vegetables I bought with my supermarket loyalty card goes down, then my health premium may go up. Every silver lining can have a cloud, you might say.
The insight that insurers are drawing from all this data is revolutionising their businesses. Access to data is now of paramount importance, to the point that one big insurer thinks that soon, no one will be offered life insurance unless they wear a health tracking device. And insurers expect to be more selective in who they insure, leaving the ‘less than fully fit’ to find cover in the margins of the market, if they can.
What this adds up to is certainly the emergence of a different type of insurance market, but perhaps more importantly, a new type of debate that is less about ‘age and insurance’ in the traditional sense, and more about ‘individualised aging and insurance’ in the digital sense. We should prepare for that debate.