16 April 2019 17:30, UTC

Disruptive technologies have been remaking industry after industry, and now the phenomenon has caught up with the world of insurance. Challenges from emerging “insurtech” startups on one hand, and giants like Amazon on the other, are forcing established insurance companies to adapt to a changing industry landscape.

With more than $8 billion invested in insurtech since 2012, it’s time to ask what the rise of new technologies means for consumers. Artificial intelligence, blockchain tech, and the Internet of Things (IoT) have the potential to simplify processes for insurers and policyholders. We’re looking at a future with insurance plans tailor-made to our needs, faster to underwrite, and above all, cheaper. But personalization can be a double-edged sword: With easy access to data that’s way more individualized and detailed than ever, insurtech raises concerns about privacy and data security.

Who benefits most from IoT devices

The Internet of Things is a gold mine for insurers. Until now, underwriting life insurance relied mainly on indirect indicators, such as the policyholder’s age, gender, and occupation. But wearable IoT devices like the Apple Watch or Fitbit can give insurance companies specific insights into individuals’ lifestyle – such as how often they exercise or how much sleep they get – which is invaluable data for more reliable risk assessment.

Healthier customers translate into more premiums collected over the lifetime of the policy. No wonder, then, that some insurers are already ditching traditional policies and switching to “interactive life insurance” based on data from wearable devices. While granting access to your Apple Watch is not mandatory yet, insurers heavily encourage it with discounts and perks.

The real price of getting a DNA test

Unfortunately for consumers, IoT devices are bad news for privacy and security . Last year’s controversy with the Strava fitness tracker revealing the locations of U.S. military bases goes to show that poor data management is incredibly dangerous. When data is the new currency, the sensitive information collected by wearables is particularly valuable and prone to misuse. And even if we were to trust third parties with protecting our data, privacy advocates question why insurers need a 24/7 stream of information about us anyway.

DNA testing has become an affordable and popular way to learn more about ourselves, whether testing for genetic diseases to investigating our ancestry. But there is a dark side to what seems an innocent practice. The DNA test kits come at a surprisingly low price because the money is made elsewhere – pharmaceutical company GlaxoSmithKline bought access to 23andme's database of genetic test results for $300 mln, just to name one company.

And that’s not the end of privacy concerns. Insurance companies have naturally taken a keen interest in data insights from DNA testing, especially when it comes to life insurance. Potential policyholders are required to disclose any medically relevant information during the underwriting process, and insurers are now asking about genetic tests as well. This could likely lead to unequal treatment, with some people getting worse policies because of their test results or even being denied services altogether. Critics are also pointing out that DNA testing shows predispositions for diseases that the policyholder might ultimately never end up suffering from – putting customers at a disadvantage during risk assessment.

Is your insurer creeping on your social media?

It’s no secret that anything we post on social media is no longer private, but it seems that users need to add their insurers to the list of potential stalkers. The state of New York now officially allows insurance companies to use clients’ social media accounts to determine their premiums, and most countries have very little legal guidance on the matter, leaving a grey area for insurers to take advantage of.

Companies can monitor policyholders’ social media for many reasons. One of them is fraud detection: If you’re posting photos from a hike while you’re supposedly suffering from a broken foot, you might get in trouble. Another strategy is using social media for predictive modeling in the underwriting process – with technologies like AI readily available, insurers can effectively analyze your entire social media footprint in seconds. This, again, is a troubling privacy breach as well as potentially discriminatory behavior when underwriting policies.

Insurech is yet another trade-off

Insurtech is here to stay, and there’s no doubt that it has the potential to make insurance plans cheaper, more flexible and more consumer-friendly. That doesn’t mean, however, that the new conveniences come free. In the case of insurtech, that trade-off might be our privacy and data security.

About the author:

Chris Jones is a Bitnewstoday contributor that comes from #TurnOnVPN — a non-profit organization focusing on a free and unimpeded internet for all. It takes part in numerous online events, aimed at promoting a safe, secure, and censor-free Internet.

Image credit: Pixabay

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