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The Right Way to Leverage Online Data for Insurance

Last week, your news feed was likely inundated by articles about the UK insurance firm, Admiral, and its rejected plan to use social media posts to price premiums for car insurance. (If you missed it, you can read about it here.)

Admiral had planned to roll out an app that offered discounted rates to individuals based on their Facebook data. The proposal was rejected by Facebook, however, for its violation of Facebook policy.

In the insurance industry today, next generation data is an integral part of the conversation. The discussion of its use across the policy life cycle, and its ability to disrupt and transform traditional processes, is one that has been dominating the space of thought leaders across the country. In light of this, Admiral’s failed attempt raises a host of questions, concerns, and lessons regarding the proper use of social and next generation data for insurance.

So how can social media, online content, and data from the Internet of Things be leveraged for insurance correctly? Take a look a look at a few of the ways below:

1. Limit its application to the proper lines of business
Certain lines of business, such as Personal Lines, pose different regulatory challenges than others. For this reason, it’s important to be aware of the laws and best practices that surround each. This can translate to prohibiting the use of data for pricing and underwriting for specific lines, instead using it for other purposes or lines of business. Claims routing solutions, such fraud risk assessments that enable payment fast-tracking for low risk claimants, are one example of a Personal Lines application that appropriately leverages social data.

Commercial Lines is another line of business that insurers can look to for proper application. Utilization of social data for small business risk assessment, for example, doesn’t carry the same regulatory or privacy concerns. The focus in this case is on an entity, instead of an individual, and the data is gleaned from sources that are no question of public domain.

2. Utilize the right data sources and methods
As we know, the internet is vast and deep place, much of which is publicly available. When leveraging data from the web for insurance purposes, it’s vital that what is aggregated falls into the category of publicly available online content. This also means looking at a number of different sources, enabling avoidance of the trap Admiral fell into by focusing on a single source. Insurers need to use data providers that are aware of the provisions put in place by specific social media sites, obtaining data only from sources in which it is legal to for the application desired.

3. Remain transparent as the conversation evolves
Consumer transparency goes a long way in privacy best practices. As precedents continue to be set in this new and uncertain time, open conversations are necessary. Consumers need to know exactly how their data will be used, and insurers need to be clear on the applications themselves. Social data has the potential to truly empower consumers while benefiting carriers, but in order for that to happen, all parties need to be on the same page. This can be achieved through explicit and complete opt-in strategies, transparency with data providers, and targeted, mindful data collection.

Social data for insurance is not new, but as its use begins to permeate different lines of business and areas of the policy lifecycle, proper application is becoming more clear. The information that can be found online is powerful and not something to shy away from, but it’s more important than ever to ensure correct usage – lest your mishap ends up a social media story itself.