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Does Big Data Have a Place in Insurance?


Written by: Mike Brown | LendEDU

Big data plays a part in your everyday life more than you might think. For example, it determines which ads show up on your Facebook news feed and lets potential lenders know how creditworthy you are. Lately big data has begun to play a role in determining whether you’re insurable and what kind of rates you ought to pay for that coverage.

The advantages of big data come at a cost some people aren’t comfortable with – their privacy. Some consumers don’t like the idea of companies knowing what they buy or how much television they watch and using that information to predict how much their health care might cost them.

To determine the general comfort level with big data, LendEDU conducted a survey of 1,000 U.S. adults and dove into the topic of data collection and the insurance industry.

Most Americans Believe Insurance Companies Should Not Be Allowed to Use Big Data

Out of those surveyed, only 15 percent said insurance companies should be able to use big data to determine a person’s risk for an insurance policy. A much higher number, 72 percent, said they shouldn’t be able to use that information. The remaining 13 percent weren’t sure whether it should be allowed.

Even though the majority of those surveyed didn’t like the idea of their private information being shared with the insurance industry, there isn’t much they can do about it. The industry is already collecting and using that information. While some people might see that as a minor invasion of their privacy, other people consider it a downright threat.

Big Data in Insurance Seen as an Equal Threat to Big Data in Social Media

When asked which was a bigger threat to personal privacy, big data in insurance or big data in social media and tech companies, 55 percent said they were equally threatening. Another 20 percent said tech companies using the data posed a bigger threat, while 10 percent chose insurance companies using the data as the bigger threat.

A smaller number, 8 percent, felt threatened by neither, and another 7 percent said they weren’t sure.

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However, When Money Is on the Line, Some Americans Will Allow For Big Data in Insurance

People didn’t seem as concerned about their privacy, however, when their money was on the line. When asked if they would let insurance companies access their everyday health information if it meant they’d get a cheaper insurance rate, 49 percent said yes. Comparatively, 32 percent still said no, and 19 percent said they weren’t sure.

But how far people were willing to go to save money on their insurance had a limit. When asked if they would allow an insurance company to install a camera in their home in return for a lower cost policy, 87 percent said no, while 8 percent said yes, and 5 percent said they weren’t sure.

More people would allow other measures than the camera if it meant saving a few bucks, however.

A surprising 11 percent would allow an insurance company to install a biometric tracker in their body if it meant they could land a cheaper insurance policy. In comparison, 82 percent said no and 7 percent said they weren’t sure.

When asked if they would let an insurance company have access to their DNA if it meant they might be able to save money on insurance, 18 percent said yes, 71 percent said no, and 11 percent said they weren’t sure.

What Does This Mean For the Consumer?

As big data continues to be collected and used by insurance companies, consumers will be on guard for how far they are allowed to go. Regulators will be watching as the public and privacy watchdogs scrutinize the subject as we continue to debate how much insurance companies will be allowed to profit off people’s personal information.

Some consumers might have a more difficult time qualifying for policies because of the big data that has been collected. Others may end up saving money. But even those who save money might not be comfortable with their privacy being compromised.

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