If you have ever filed for individual life insurance you have probably had a medical screening of some sort. For the best rates, many insurance providers require a full physical, blood analysis, and urine screenings. These medical screenings are used to determine the health of a potential policy holder. The results of these tests will first determine if you receive the insurance policy and second at what rate.
The healthier you are, the cheaper your insurance premium will be. However, as the WSJ recently reported, some insurance companies are looking for a cheaper (and just as effective) way to screen their applicants. This lead the U.S. division of the British insurance provider Aviva to look at 60,000 of their most recent applicants and see if there was a predictive modeling system that could be used based mostly on consumer marketing data. The company found “persuasive” evidence that the consumer marketing data could predict consumer health just as well as the currently used traditional medical screening techniques.
What does this mean for the future of insurance underwriting? Medical screenings are costly and time-consuming for insurance companies. It can cost upwards of $1,000 to screen a potential applicant; however, consumer marketing analysis on this large of a scale would cost approximately $5 per applicant. This can save insurance companies are great deal of money which they could then pass on to their clients. Life insurance purchases have been decreasing since the 1980s and it is largely due to the increase in policy premiums. If screening applicants and the underwriting process where not quite so expensive, and arguably intrusive, more people may be inclined to purchase.
This is where big data analysis can play a huge roll. With so many people now online, consumer database research companies have a plethora of information that you may not even know about. Websites that you visit, purchases that you make, and some public social media information such as social media accounts you follow can be easily harvested. Taking this data and creating an overall picture of a person can be used to infer health. This is exactly what these companies are trying to prove.
If someone is active in health forums, subscribes to running magazines, and watches very little television, those can all be indicators of a healthy lifestyle and overall good health. Likewise, someone who frequents fast food establishments, watches lots of television, and leads a sedentary lifestyle could be more prone to health risk.
The studies are just being performed, but the data is pretty convincing- we can determine to a reasonable ability the health of an individual based on consumer habits. This is something that we may eventually see start seeping into the underwriting process of many insurance providers barring no mandates such as Fair Credit Reporting Act are implemented in this regard. Do you think consumer data will be the new medical screening process for insurance companies in the near future?