Wednesday, 3 October 2018

Your Fitbit will betray you

Yesterday I wrote a post about how home insurers are starting to more accurately price house insurance based on natural hazard risk. Home insurance isn't the only area where insurers are looking at adopting more sophisticated screening methods to deal with adverse selection. Take this story from the New Zealand Herald in June:
Fitbits are already used to track your heart rate, the amount of exercise you do and how much you sleep - essential data that could potentially be used by insurance providers to determine your premiums.
The boom in wearable health tracking technology means we now have more information than ever before on health and well being of people at any given moment.
The Telegraph reports that information collected from these devices is already being used by insurers to calculate insurance premiums and there are concerns that this might lead to only the healthiest customers enjoying lower premiums.
This is serious business. Insurance companies have it in their interests not only to ensure the lowest-risk customers but also to detect potential health conditions before they become severe (and expensive). A study of the insurance market by the Swiss Re Institute, a research organisation, last year found that insurers had filed hundreds of patent applications relating to "predictive insurance modelling".
The issue that an uninformed health insurer or life insurer faces is essentially the same as the home insurer from yesterday's post. They can't tell the low-risk applicants from high-risk applicants. A pooling equilibrium develops, where everyone pays the same premiums (coarsely differentiated based on age, gender, and smoking status). A savvy and entrepreneurial insurer that was better able to tell who the low-risk insured people are could attract them away with lower premiums (knowing that they would cost less to insure because they are low risk).

So, that is effectively what insurers are starting to do. As the Herald article notes:
In making these moves, Insurance companies aim to collect data that could serve to help them make better policy decisions or even tweak existing policies over time.
The Telegraph reported that policy agreements increasingly feature clauses that allow insurers to collect data on their customers.
This is a point that I first made in a post back in 2015 (and an earlier post on technology in car insurance in 2014). We can all look forward to insurers asking for our Fitbit data when we apply for health or life insurance. And if we're fit and healthy, we'll give it to them. The people most likely to withhold that information are the unfit and unhealthy (and those who are most privacy-conscious). Denying access to your Fitbit data would probably be enough to signal to the insurer that you are high risk, and result in a declined application or a higher premium. So, even if you want to opt out of sharing your data, your Fitbit will still betray you.

Read more:

No comments:

Post a Comment