What if there is a way to redefine personal insurance by redrawing the privacy line, allowing the insurance agencies to monitor the behaviour or life style of the subscriber? Such an idea attracts immediate reaction to privacy concerns but just for the moment, let us treat privacy as the big white elephant in the room. Letting the elephant rest in the corner and assume that these concerns are under control so we could proceed with this thought exercise without injury.

This thought exercise suggests a change in how health and life insurance companies engage with their subscribers by using the Internet of Things (IoT) to measure behaviour and to manage risks. This thought was inspired by Usage based insurance [1], used in the automotive industry and based on the growth of IoT ready sensors and devices, usage based insurance may see it spread beyond auto insurance into almost any measurable object to be insured.

This may start with the insurance companies introducing new experimental packages with reduced premium rates in order to attract subscribers. Data collected would be properly curated and potentially tokenized or abstracted to reduce the risk of direct exposure of personal data.

The Internet of Things

The Internet of Things or IoT is a buzzword used to describe smart devices and sensors which collect and send data over the Internet to be stored and processed. Something as innocent as your mobile phone or an activity tracking wrist band that you take with you wherever you go. The technology is now embedded in everyday items as well. Beyond smart wearable technology, it may take a form of the gym’s treadmill, weighing machine or your doctor’s blood sugar sensor and blood pressure monitor or a self driving car. Anything that is intelligent, knows where it is, collects data on it’s environment (which would probably include the human user) and communicates this data with an Internet hosted service can be considered as a member of the Internet of Things.

Less privacy?

In the age of “Big Data” and a post-Snowden world, consumers are more aware about the various topics of privacy, the importance of personal information and the distinction between privacy and ability to secure private information.

Living our lives consuming and producing data on the network (social media or mobile phones) means we are already leaving digital breadcrumbs or footprints for many to observe.  We would assume that this would be an obvious source for lifestyle information to measure risks but it contains a lot of noise and arbitrary data which might not be appropriate and almost impossible to correlate. For the insurance business, risk management requires contextually known parameters which can contribute or reduce risks. Rather than “measure everything”, it is more effective to pick relevant parameters to measure depending on the types of coverage selected, the general risk assessment of the subscriber and the lifestyle category chosen.

Currently, to subscribe to an insurance service, the subscriber has to provide personal details and potentially undergo a health checkup before an appropriate contract can be drawn up. The subscriber also allows the insurer to perform a background check on the subscriber to be done to ensure that the information provided to the insurance company is correct. The new model would extend this to include more frequent data collection by using technology that would not be out of place in the subscriber’s lifestyle.

The data collected can be processed for the subscriber’s benefit as well. The sacrifice of some privacy is paid back with their subscriber’s life presented back to them in easy-to-understand graphs and pictograms. The subscriber may use this life analytics tool to either tune their lifestyle to reshape the graph to better fit a lower risk group or to buy additional cover to accommodate the additional risks presented. Such privacy exchange model is already a common place with personal health devices and apps already flooding the market [2]. With the success of the personal health apps coupled with the initial disclosure of personal information, do we still see the privacy problem in the same way or is there a new cultural shift in what how we allow our personal data to be used.

What type of data would the insurance company need? 

Let us imagine a health insurance service requiring the subscriber to download an activity tracking application. Once activated, the subscriber would enter their weight and other vital information, configure their health goals into the app. The app will now personally assist the subscriber and will provide daily logging of their activity level and help track their health goals. Let’s call this app the “Life-App”. At this point, the Life-App is almost indistinguishable from a personal health tracking app. The collected data are processed and provided back to the subscriber using the Life-App tool installed on their mobile phone and makes it into an active node in the Internet of Things. The Life-App is also a portal that allows the subscriber to observe themselves in relation to lifestyle choice they’ve selected. The Life-App can also be hub for other interconnected IoT devices providing a management tool for those device(s).

Periodically, the subscriber goes to the panel doctor or agent for a general measurement. The weighing scale, ECG, blood pressure, blood glucose machines may automatically link up with the subscriber (e.g. requiring the machines to scan a QR code from the subscriber’s Life-App before taking their reading) or the information is entered into the the insurance company’s system using the doctor or agent’s console. Once the data have been collected, the data are sent back to the insurance company to be processed and scored onto the subscriber’s database. This allows the insurance company to better understand how well the subscriber is doing in regards to their general health and align the Life-App measurements accordingly. The subscriber can immediately see their results on the Life-App allowing them to make lifestyle adjustments as needed.

Two types of data are taken, continuous data and snapshot data. The Life-App brings the two data sets together and gives the subscriber relevant information to empower the subscribers with potentially positive life choices. This life interaction is an intimate connection between the insurance company and the subscriber and can probably be seen as a new gold standard for personal insurance.

Why would Insurance companies need to know your lifestyle?

For insurance companies to better manage risks, the information collected allow the insurance system to classify behaviour types. Patterns for risks can be developed and understood. The information may be used to calculate the risk exposure of the subscriber. The risk exposure may be compared to the subscriber’s cover to rate their compliance to the agreement. This provides a very personal connection between the insurance company and the subscriber and as an added benefit, the subscriber can provide a self service configuration of their insurance portfolio to better fit the policies to their lifestyle through the Life-App.

The transparency further reduces the existing window for fraud. It does introduce a new horizon of risks but these risks are pre-existing risks surrounding data and identity security and various other security chain issues. These are concerns which are not new but would be further exposed with the wider use of networking systems.

In general, the insurer would like to know that the objects they insure are operating within an acceptable operating criteria. They also offer insights to the subscriber to manage their own risk exposure. With the additional information, the insurance companies can also offer a range of new products to fine tune and mitigate risks at a higher resolution.

Benefits?

Allowing the personal connectivity between the insurer and the subscriber enables new business opportunities. Insurance subscription becomes a running service. It’s no longer only looked upon as an investment for a rainy day but something that provides continuous value to the subscriber. The Life App may be used as a positive daily coaching tool to elevate the quality of life of the subscriber. The Life-App may also provide a low entry point for a potential subscriber. It can be provided for free and allow “in-app purchases” for purchasing insurance packages.

By also allowing certain levels of configuration of the risk parameters, the insurance subscription could be offered in a form of a new self-service insurance store. Allowing subscribers to add or remove specific insurance service or to manage penalty points through loading of other services. Matching the cost of the insurance to the individual by allowing insurance to be configurable and matched to the risk profile of the subscriber.

Finally, it is arguable that with a more reliable monitoring and measuring tool, the Life-App could be utilised to challenge insurance fraud. Of course this is an ambitious claim but it is made with the assumption that reliable monitoring tools are able to track the beneficiaries better. Given an simple example that most mobile phones have built in accelerometers and gyro meters which can take accurate measurement of movement patterns. This data may be used to find cases of fraud in injury resulting in mobility impairment claims.

The future?

The elephant comes back into view, how transparent will society be? Claims may be adjusted based on behaviour trends, types of incidents and also the statistical probability of an incident happening in the present condition or environment.

Packaging of insurance may change to accommodate the mountain of data. With increased resolution in measuring risks and lifestyle, the product market is open for new innovation.

For the present and future generations living in the connected world, technology is what we breathe. It augments our lives and it extends our experience. It is our identity and it is part of our life and because of that, we can be measured by it. Are we looking at a paradoxical future where the insurance industry shapes human culture and how we live in it? A twist in the Orwellian theatre may be coming soon.

It starts off with a simple proposition, would you sign up if it means lower premiums and better service?

[1] https://en.wikipedia.org/wiki/Usage-based_insurance
[2] http://www.businessinsider.com/health-and-fitness-apps-exploding-in-popularity-2014-6

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