Hyperpersonalization will change the role of insurance in our lives

Connected sensors and other datasets allow insurers to tailor policies to individual customers. Currently, they are using insights from this data to influence policyholder behavior. This combination of extreme analysis and behavioral impact changes the way insurers manage risk, from distributing it in bulk to assigning it to specific individuals. This risks establishing inequality, critics warn, and so far it is unclear how hyperpersonalization should be managed.

Insurers use data to drive their customers for good behavior. (Photo by National Cancer Center / Unsplash).

Since 2008, there are more network devices than people. According to Transforma Insights, there will be 8.7 billion active IoT devices worldwide by the end of 2020, which is projected to reach 25.4 billion by 2030. More than 50% of UK homes now have smart devices. Research By smart home week. In particular, automobiles are rapidly becoming saturated with sensors. Analyst company Berg Insight predicts that shipments of vehicles with telematics systems will increase from 40 million in 2019 to over 70 million in 2025.

According to experts, the data produced by these sensors is revolutionizing the insurance industry. McKinsey Insurance partner and associate partner of the company’s financial services analytics platform Ingenuity, Doug McKinsey said, the granularity of insights that can be provided to individual customers allows providers to align their policies to “one segment.” I will. “They can take all of you and say,’This is exactly the premium I should give you.'”

And it’s not just sensor data that drives this hyperpersonalization of insurance, McElhaney says. “There are companies that collect information about what they are spending money on, such as where they are spending money. There are companies and organizations that can figure out what is in the fridge. All the data is there, so The train departed. Station. ”

In the United States and other countries, insurers often use credit scores to calculate the risk of individual policyholders making claims.But critics argue that this is discriminatory-Washington, USA earlier this year. Prohibit the use of credit scores By insurance companies for these reasons. As such bans become more widespread, alternative datasets will become more and more compelling, McElhaney says. “if [they] Stealing credit, telematics data will be terribly attractive [for car insurance providers].. And you can claim that it is objectively fair. That’s the way you drive. ”

How Insurers Affect Customer Behavior

Once insurers have developed a very fine-grained representation of their individual customers, the next step is to influence their behavior to reduce risk, McElhaney says. Insurers can reward customers who drive safely or eat healthy with lower premiums or more direct rewards such as cash payments and vouchers. “This is the behavioral psychology you’re superimposing on it,” he explains.

For example, South Africa’s Discovery Insurance has created a so-called vital behavior change platform that “guides, encourages and provides clients with access to a wide range of personal channels to mitigate personal risk.” The company dynamically pricing services according to policyholder behavior. “Understanding the correlation between behavior, cost, and outcome, and leveraging behavioral economics to design behavioral change models that plug into insurance and other financial services products, have a positive impact on behavior. You can continuously and dynamically measure price-related risks. ”

And insurers don’t just reward good behavior. “The industry is [a] If you’re a bad driver, they’re actually starting to increase your premiums A bimodal approach to pricing, “says McElhaney.

How is insurance hyperpersonalization regulated?

This combination of extreme data collection and behavioral impact gives insurers more insight into the lives of policyholders than many feel comfortable, as well as better control over their behavior. can. This can change the role the insurance industry plays in society, from pooling risks collectively to emphasizing and retaining inequality.

A World Economic Forum report on the future of data-driven healthcare states that misuse of sensor data “leads to discriminatory insurance policies and prices, allowing people who reach their limits to access basic health care and other types of insurance. It can be difficult to do, “warned last year. In a broader sense, it has the potential to “fragment the solidarity base of insurance and undermine its socio-economic and ethical foundations.”

However, so far, with the exception of general privacy protection, there are few concrete steps to regulate insurance hyperpersonalization.The· AI rules proposed by the European Commission It imposes specific obligations on organizations operating “high-risk” AI systems, such as ensuring data quality and transparency. However, the European Consumer Rights Group BEUC said, “This excludes many uses of AI that affect consumers in our daily lives, such as smart thermostats and smart thermostats. Health insurance risk assessment“In the United States, the National Association of Insurance Commissioners (NAIC) has formed a Big Data Working Group that is considering the need for new governance mechanisms.

Meanwhile, the governance of hyperpersonalization within insurance relies on existing rules and self-regulation. It may even depend on the social conscience of insurance industry leaders, McElhaney says. “I hope the leadership of these companies is thinking about what social norms we should follow.”


Claudia Glover Tech monitor.. Hyperpersonalization will change the role of insurance in our lives

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