aNewDomain.net — That loyalty card from the grocery store that saves you money on potato chips and soda may actually cost you a lot more when you apply for health insurance months or even years later. Insurance companies are scrutinizing purchase habits to build prediction models about customers’ health and associated risks.
According to a story in the Economist, two insurance companies are already using a process known as automated underwriting – a method where a customer’s market data determines his or her level of risk instead of a conventional blood analysis and personal examination. For one it’s much cheaper because the data already exists, and processing is up to six weeks faster.
A whitepaper published in May 2011 by the risk management arm of Deloitte says,
“Many life insurance companies are turning to technology to speed and remove cost from the underwriting process. Automated underwriting systems have been developed to reduce the manpower, time and/or data necessary to underwrite a life insurance application, while maintaining the quality of underwriting decisions.”
Automated underwriting is fast becoming the norm. In January, 2012 Farmers Insurance partnered with StoneRiver’s LifeSuite to provide automated underwriting services.
Data miners – those men and women who sift through the mountains of information that we create in our daily business –realize the power of the narrative from the information.
One data miner has changed his lifestyle and purchasing habits. Kevin Pledge, CEO of the data mining consulting firm Insight Decision Solutions in Toronto has forgone all plastic. He now pays for his burgers in cash. Pledge says insurance interest in data mining will only grow.
Experts recommend reading the privacy statement of your supermarket loyalty card. Some supermarkets like Safeway promise “not to sell, rent, lease, share or disclose personal information to any non-related companies or third parties without your prior consent.” There are exceptions. They may give the information to partners and though we can expect a reasonable expectation to keep the data safe, there are no guarantees that it won’t be lost to a data breach.
Image credits: Wikimedia Commons
Based in New York, Dino Londis is an IT veteran and senior technologist at aNewDomain.net. Contact him at Dino@aNewDomain.net.