For most of the past decade, people from around the world have sat down and watched major tech companies begin to expand their reach in every aspect of our daily lives. In many cases, the results have been positive, like bringing our favorite entertainment to every device we own. We loved being able to order food and consumer goods with unmatched ease. Here's how great technology has to deal with the review of data collection – but the big insurance could be next (we hope).
The hoarding of big tech companies, our data, is one thing – The collection of big insurance is another.
Getting a better overview of how businesses have made the possible amenities has not been pretty. Companies like Facebook have been involved in a controversy after the other, mainly with regard to how they deal with users' privacy issues. At the same time, Google has been courting a public relations nightmare surrounding its extensive and intrusive data collection practices.
To top it off, however, the revelation that Microsoft, Apple, Google and Amazon allowed contract employees to listen to users' voice recordings, sometimes without their knowledge.
The backlash generated by these events has increased over time, which has led to a further crackdown on big tech and the way they collect and use user data. The problem is that the technology industry is not the only one to collect large amounts of unregulated user data.
The global insurance industry has collected all kinds of data on millions of people for years – and there is little regulation and even less attention to their activities.
Power a Big Data Machine
Anyone who follows the latest trends in insurance technology should know that the industry is taking a step forward in big data and AI. Their main objectives are to streamline service delivery, expedite claims processing and increase profits. To do this, they redouble their efforts to get their hands on all the pieces of data that they can find on consumers.
Carnivores of Health Care Data – includes the collection and storage of vast amounts of so-called lifestyle data that are not even related to health.
The problem, with respect to privacy, is that insurance companies collect data without anything by consent – especially in the field of health insurance. What they do is also not illegal,
by the way. In the United States, at least the vast majority of people do not actually have their own medical data.
This means that health care industry giants like Optum can collect as much private medical data as they want. They have already collected all your health information – for more than half of the total population of the United States. Insurance companies can sell it to whoever they want.
These are not just medical records
The huge data collection does not stop at the health records. Insurers from all walks of life use data sources such as social media histories, media consumption records and even court records to use as data points. The idea is to build a customer profile that presents a complete picture of who they are, how they live and their specific preferences.
At first glance, this may seem to be a net benefit to consumers. It should allow companies to more specifically tailor their offerings to each individual, rather than to demographic subsets and risk pools. In practice, however, early results have not been as positive.
Already, insurers have started using their data to engage in a practice that they call "price optimization."
Insurance increases your rates as a customer – not according to the actual risk score, but according to the expected behaviors. For example, if the data models of an insurer show that an individual does not take the time to shop when buying other types of goods and services, it triggers a series of price increases insurance.
This price increase is based solely on the prediction that you do not go around the price – so that they can do what they want. Your insurance will be charged at higher rates.
In addition, insurers generally have no obligation of transparency in the way they set rates. Most of the time, they can claim that their actuarial models are trade secrets. The trade secret is even used when they are pressed by the insurance regulators for more details.
The result is a system that pulls more variety of consumer data, but without monitoring how it is used. Even worse, consumers have no way of withdrawing from the process or even knowing what information an insurer has used to make their decisions.
While the general public has remained obsessed with the way large technology companies are using – and some would say they are abusing their data – the same can not be said of the data practices of the insurance industry.
The dishonest insurance industry has used the lack of attention to intensify its data collection efforts, both in sight and behind the scenes. Until now, only the practice of price optimization has caught the public's attention because it is very tangible. But other visible results from the data mining of the insurance sector are not taken into account.
In the absence of any real supervision, some insurers are even starting to point to advanced technologies like facial analysis to increase their data collection directories.
With the rise of IoT and connected devices, we can expect every little detail of our lives to be documented, from GPS car tracking to the grocery store we have in our fridge clever. It is a practice that could have disturbing nuances, depending on how it is used. The good news, if any, is that we are beginning to think that the insurance industry has begun to attract the kind of attention that suggests a future settlement.
An account can come
Regulators from specific segments of the insurance industry have begun to launch surveys on how the insurance industry uses all the data it collects. Life insurers, in particular, already face difficult questions about how they use non-traditional data sources.
There have also been early efforts in some states to restrict how insurers can use non-health data in their underwriting procedures.
These measures, however, will probably not be the last word on the issue. As more and more regulators begin to look at what the insurance industry is doing, there is a good chance that the public will begin to take note of it as well. If the audience finally wakes up and notices what's going on – it's almost certain to create an uproar similar to what big tech is currently experiencing.
Insurers would do well to pay close attention to what happens to Facebook, Apple, Amazon and other companies. The day the spotlight is on, insurance companies could arrive sooner than they thought.