Data companies mine social media profiles to create personas life insurance companies can use to influence premiums.
Those Instagram posts of you partying on vacation could soon raise your insurance premiums. Insurers have been using policyholder data to calculate health and auto risk for years now. Social media is the next frontier, with life insurers leading the way.
The interest in using social media data to set insurance premiums comes on the heels of a favorable Department of Financial Services of NY ruling, so long as the information collected is non-discriminating. Insurers are not allowed to factor race, gender or religion in setting premiums. The DFS ruling states:
“The Department fully supports innovation and the use of technology to improve access to financial services. Indeed, insurers’ use of external data sources has the potential to benefit insurers and consumers alike by simplifying and expediting life insurance sales and underwriting processes. External data sources also have the potential to result in more accurate underwriting and pricing of life insurance.”
This amounts to a green light for New York State insurers to utilize data to set premiums. Is it anything new? Life insurers have been using public records for years. Information on homeownership, credit, education and legal rulings have all been used by life insurers. Furthermore, social media data has been used to combat insurance fraud since 2012. Best not to post pictures of yourself rock climbing when you have an injury claim in litigation.
What They’re Looking For
Insurance companies, or the data mining companies that sell to them, are mainly looking to create lifestyle profiles from your social media. Data companies use algorithms to categorize individuals as health nuts, coach potatoes, sports enthusiasts and everything in between. If there are pictures of you smoking on Facebook, be sure they can be used by a health or life insurance company, as this is risky behavior.
How each insurance company uses this data to influence premium setting varies from company to company, and is not necessarily transparent. Life insurance companies have used questionnaires to ask lifestyle questions, but using social media is thought to be a more honest representation of a policyholder. Is it? Many social media profiles are a more idealized than honest representation of themselves. The predictive risk models using social media are in a nascent phase. The success of algorithms using social media in determining risk remains to be seen.