For most of the past decade, people all around the world sat and watched as significant tech companies started to expand their reach into every part of our daily lives. In many cases, the results were positive, like bringing our favorite entertainment to every device we own. We loved being able to order food and consumer goods with unparalleled ease. Here’s how big tech faces data collection scrutiny — but big insurance might be next (we hope).
Big Tech Companies Hoarding, Our Data, is One Thing — Big Insurance Collection is Another.
Getting a better look at how companies have been making conveniences possible hasn’t been pretty. Companies like Facebook have been embroiled in one controversy after another, mostly revolving around how they treat user privacy concerns. At the same time, Google has courted a public relations nightmare surrounding its extensive and intrusive data collection practices.
Topping it all off, though, was the revelation that Microsoft, Apple, Google, and Amazon were allowing contracted employees to listen to voice recordings of users, sometimes without their knowledge.
The backlash generated by these events has grown with time, resulting in a renewed push to crackdown on big tech and the way it collects and uses user data. The problem is that the tech industry isn’t the only one that collects vast, unregulated amounts of user data.
The global insurance industry has been collecting all kinds of data on millions of individuals for years – and there are little regulation and even less attention paid to their activities.
Feeding a Big Data Machine
Anyone who follows the latest insurance technology trends should know that the industry is making a push into big data and AI in a big way. Their main goals are to streamline service delivery, enable faster claims processing, and increase profits. To do it, they’re ramping up efforts to get their hands on every scrap of data they can find about consumers.
Healthcare data carnivores — includes the collection and storage of vast quantities of so-called lifestyle data that are not even related to health.
The problem, as it relates to privacy, is that insurance companies are collecting data without anything by way of consent — especially within the realm of health insurance. What they’re doing is also not illegal,
That means healthcare 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 US population. The insurance companies can sell it to whomever they want.
It’s Not Just Medical Records
The enormous collection of data doesn’t stop with health records. Insurers of all stripes are tapping into data sources like social media histories, media consumption records, and even court records to use as data points. The idea is to build a profile of customers that presents a complete picture of who they are, how they live, and their specific preferences.
On the surface, that sounds like it could result in a net benefit for consumers. It should enable companies to more specifically tailor their offerings to each individual, rather than demographic subsets and risk pools. In practice, however, the early results haven’t been anywhere near that positive.
Already, insurers have started to use their data to engage in a practice they call “price optimization.”
The insurance increases your rates as a customer — not based on actual risk scoring, but based on predicted behaviors. For example, if an insurer’s data models show that an individual doesn’t take the time to shop around when purchasing other types of goods and services, it triggers a series of insurance price increases.
This price hike based solely on the prediction that you don’t shop around for price — so they can do what they want. Your insurance will be charged at higher rates.
What’s more, insurers generally have no obligation to provide any transparency into how they set rates. Most of the time, they’re able to claim that their actuarial models are trade secrets. The trade secret is even used when they are pressed for details by insurance regulators.
The result is a system that’s pulling in more varieties of consumer data, but with no oversight into how it’s being used. Worse still, consumers have no way to opt-out of the process or even find out what information an insurer has used in making their decisions.
Although the general public has remained fixated on the way that big tech firms are using – and some would say abusing their data, the same can’t be said about the data practices of the insurance industry.
The dishonest insurance industry has used the lack of attention to ramp up their data collection efforts both in plain sight as well as behind the scenes. So far, only the practice of price optimization has drawn any real attention from the public — because it’s very tangible. But other visible results of the insurance industry’s data-mining isn’t being addressed.
In the absence of any real oversight, some insurers are even beginning to move toward bleeding-edge technologies like facial analytics to augment their data collection repertoires.
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 what groceries we have in our smart fridge. That’s a practice that could have some disturbing undertones, depending on how it’s put to use. The good news, if there is any, is that it’s starting to look like the insurance industry has started to draw the kind of attention that portends a coming regulatory reckoning.
A Reckoning May be Coming
Regulators in specific segments of the insurance industry have begun to launch probes into how the insurance industry is using all of the data it’s been collecting. Life insurers, in particular, are already facing some tough questions about how they’re using non-traditional data sources.
There have also been some early efforts in some states to restrict the ways that insurers can use non-health data in their underwriting procedures.
These moves probably won’t be the last word on the issue, however. As more regulators start to look into what the insurance industry’s been up to, there’s a good chance that the public will start to take notice, too. If the public finally wakes up and notices what’s happening — it’s all but certain to create an uproar similar to what big tech is experiencing right now.
Insurers would do well to pay careful attention to what happens to Facebook, Apple, Amazon, and other companies. The day for the spotlight to be turned on the insurance companies may be coming sooner than they think.