© Alexander Yakimov |

As more data streams become available, digital vulnerabilities widen. These fundamental problems beg the question – how feasible really is insurtech?

Many industries have been remade due to disruptive technologies and this trend is now reshaping the insurance world. From challenges that stem from the emergence of “insurtech” startups to giant companies like Amazon, established insurance companies have been forced to adjust to the shifting industry scene.

Since 2012, over $8 billion has been invested in insurtech, therefore, consumers need to be aware of how new technologies affect them. Technological advancements such as the Internet of Things (IoT), blockchain, and artificial intelligence (AI) are capable of simplifying processes for policyholders and insurers. This means that in the future consumers will receive insurance policies that are custom-made to fit their needs, that are faster to underwrite, and most importantly, policies that are cheaper.

However, personalisation can either go right or wrong for the consumer. This is because insurtech will easily access data that is more detailed and personalized, which raises data security and privacy concerns.

Big beneficiaries of IoT devices

For insurers, the Internet of Things is their golden goose. For a long time, including the present, underwriting life insurance majorly depended on indirect indicators like occupation, gender, and the age of the policyholder.

Nevertheless, the presence of IoT devices such as the Fitbit or Apple Watch enable insurers to get insight into the lifestyles of individuals, for example, the amount of sleep they get or how much they exercise, which is important data in terms of credible risk assessment.

The healthier the consumers, the bigger the premiums the insurers will be able to collect over the policy’s lifetime. Consequently, it is no surprise that various insurers are already doing away with conventional policies in favour of “interactive life insurance” which comes from data retrieved from wearable devices. Whereas it is not a requirement for you to grant access to your Apple Watch at the moment, insurers actively encourage it and even offer incentives such as discounts and other perks.

Regrettably, for consumers, they may have to compromise on their privacy and security because IoT devices are unreliable when it comes to privacy and security. A good example is a controversy that occurred last year with the Strava fitness tracker which ended up revealing the U.S. military bases locations.

This illustrates how poor data management could be potentially dangerous. Due to the fact that data is literally the new currency, all the exclusively sensitive data collected by wearables is very much susceptible to mismanagement and exploitation. Even though there was the slightest possibility that we could trust third parties with safeguarding our data, advocates of privacy raise concerns on why insurers require round the clock streaming of our information in any case.

The true price of your DNA test

It has increasingly become popular and affordable for people to undertake DNA testing to either investigate their ancestry or test for genetic diseases. However, this practice which seems to be harmless may have a dark side. It may be interesting to note that DNA test kits come at a surprisingly affordable price.

Nonetheless, the real money is made elsewhere. For instance, pharmaceutical company GlaxoSmithKline bought access to 23andme’s database of genetic test results for a mind-blowing $300 million. This is just one of the many companies purchasing genetic data.

The privacy concerns do not end here. Naturally, insurance companies tend to take a keen interest in DNA testing data insights especially in the case of life insurance. Insurers require potential policyholders to disclose any information that is medically relevant in the underwriting process and are additionally asking about genetic tests.

This could potentially result in biased treatment whereby some people will be given worse policies due to their test results or even worse get denied services entirely. Critics are also raising concerns about the fact that the predispositions for diseases showed in DNA testing does not ascertain that the policyholder will end up suffering from those diseases and this ends up putting customers at a disadvantage during the process of risk assessment.

Does your insurer creep on your social media?

It is clear that anything we choose to post on social media ceases to be private. However, it seems as though social media users need to include insurers on their list of potential stalkers.

Currently, the state of New York officially authorises insurance companies to use the social media accounts of their clients in order to determine their premiums. Most insurance companies have very little legal guidance on this matter, which leaves a grey area for insurers to benefit from.

There are many reasons as to why insurance companies can monitor social media accounts of policyholders. One reason is that if a policyholder is posting photos from a hike yet they are supposedly suffering from a broken foot, they might get into trouble. Another reason is the use of social media for predictive modelling in the underwriting process. The presence of technologies like AI enables insurers to effectively analyse a policyholder’s social media footprint in a matter of seconds. This too speaks to privacy concerns and potential discrimination when underwriting policies.

Is insurtech yet another trade-off?

Insurtech cannot be ignored and it seems to be here for the long run. It has the potential to make insurance plans more consumer-friendly, more flexible, and cheaper. However, this does not mean that these new conveniences do not have a price. For insurtech, the trade-off might be our data security and privacy.


Please enter your comment!
Please enter your name here