Individuals have often been cautioned to watch what they post or otherwise divulge via social media, because employers may base hiring and firing decisions in part on what they find online. But now, there is another group that may also be watching our social networking and analyzing the data that they glean from it: insurance companies.
Has a friend posted a photo of you online in which you were smoking a cigarette? And if so, does it matter? It might, if you have previously told an insurer that you have never used tobacco. Have you said that you are a moderate drinker? Better make sure that there are no photos online of that night when you partied heavily. Are you a plumber or contractor seeking new insurance for your firm? You’d better check what consumers are saying about you online.
Such questions are becoming more relevant as insurance companies—whether they offer car, health, or homeowners’ policies—contemplate turning to social media to find out more about their policyholders’ behavior. One insurance analytics firm predicts that, within the next three years, this kind of research will begin to occur. In the interim, tests are underway to see how predictive our online data can actually be, for risk and pricing purposes.
Currently, insurance companies are turning to social-networking sites and social-media data to determine if there are incidences of fraud or misrepresentation by their customers—whether they are consumers or businesses. And recent news stories reveal that the next wave of research activity may be insurers’ using social-media information in underwriting decisions—that is, decisions about what type of risk a policyholder presents, and what rates to charge the policyholder as a result.
Data-mining firms such as Experian, Acxiom, and others already aggregate lots of data about our activities—including our online preferences and purchases. Insurance companies now represent a new market for their data and services.
Will the Use of Social Media in Insurance Underwriting Be Deemed Legal?
At present, insurers aren’t developing social-media scores because state insurance rate-setting regulations do not permit it. Before moving forward on that, insurance companies will need to approach coinsurance regulators with requests to use modeling based on social-networking data—but that development may not be far off.
“As with the use of credit scores in general insurance, it will take some time to determine what the boundaries are in use of this data for underwriting,” the Celent report says. One of the factors that will be used in setting those limits will be state laws and regulations.
State insurance commissioners have not yet offered official guidelines regarding the overall use of social-networking data. But they already permit the use of other third-party data in the underwriting process—including the use of credit reports and credit scores. Financial histories have thus been deemed relevant to insurance risk.
So it’s time for insurance commissioners to learn more about data aggregation and social networking: What trials are being run that are focusing on insurance and online marketing and other consumer profiles? What are the trends, and will this data prove truly relevant? Is there any benefit to consumers from the use of such data in underwriting? At present, the industry is examining this issue, and regulators, too, need to figure out the answers to some of these questions.
There are already some protective measures in place. First, insurers cannot use data that would cause them to discriminate in rates and underwriting based on race, gender, or religion. But as with credit histories, economic or financial data can be used legally by underwriters to calculate insurance premiums—and such data may often impact different groups of people disparately.
Social Media is a part of everyday life for most Americans. Each day, millions of people post on Facebook, Twitter, Instagram, and other networks. These accounts are not as private as you think. And Insurance companies are using this fact to underwrite new policies and investigating claims.
I have seen it happen personally with commercial general liability and workers compensation. When I submit an insurance application to my underwriters for a quote and tell them the company is not roofing — but there is a picture of someone on a house hammering a roofing nail on a shingle on their website or posted on Facebook — what does that say about your company? We have all heard the saying A Picture Speaks A Thousand Words.
A similar upheaval is on the way in life insurance, which so far has been slow to embrace digital change. Life-insurance companies are still selling the old-fashioned way, broker to customer, instead of empowering people to make their own decisions and participate in the process. Moreover, insurance-policy sales are still laden with excessive face-to-face interaction and mountains of paper.
But consumers in every sector now demand speed, relevance, and convenience, no matter what channel they use or what product they’re shopping for—and insurance is no exception. Every month there are more than a million Google searches for terms related to life insurance and seven million total visits to the websites of the top ten carriers—a sign of considerable online interest in life insurance. But consumers can’t search, evaluate, and purchase policies online as easily as they’d like to. While more than 70 percent start the life-insurance information-gathering process online, fewer than a third complete their purchase there.
To stay ahead of the digital revolution, carriers must take an omni channel approach, providing compelling and relevant customer experiences no matter where their customers choose to interact. That takes a lot more than simply creating a mobile app. It requires a fundamental change in an organization’s operations and mind-set, affecting everything from the role of the agent to new, advanced, data-analytic capabilities.
“Knowing what the risk is, is pretty important. When it comes to new businesses, or they’re reviewing the renewals, they’re absolutely looking at those pages,” said Texas Term Broker Insurance owner Scott Thiltgen.
While local insurance agents say they’re not currently using social media to determine premium costs for clients. They do say your posts can have an impact on your claims.
“It absolutely has an impact when it comes to claims. If you are injured and your claiming that you can’t work and you’re hurt and your disabled because of an accident or injury at work and you’re posting a picture of yourself finishing a marathon. You best believe the insurance company is going to have those photos too,” said Scott Thiltgen.
Residents we spoke to in the area say they weren’t too surprised to learn about the new tactics insurance agencies could soon use.
“I think they’ll take every avenue possible to try and understand the risks that they’re taking and underrating risks and whoever they’re insuring. I certainly think it gives you another reason to be careful with what you post,” said Scott Thiltgen.
And while your posts may not have an impact on your life insurance premiums just yet, agents want you to remember this:
“It is really not a good idea to post pictures of you doing something that you really wouldn’t want somebody to see,” said Scott.