With advances in machine learning, insurers must find innovative ways to access valuable customer data.
Machine learning and big data are giving insurers unprecedented insight into risk, fraud, and customer needs. However, even as these technologies take root in the insurance industry, Europe’s General Data Protection Regulation and other privacy regulations are limiting companies’ ownership and use of customer data. To overcome these challenges, insurers will have to rethink their customer relationships and find creative ways to access valuable data.
GDPR’s impact on gathering insurance data
GDPR regulations place limits on what information insurers can collect and how they handle that data, along with putting the onus on the insurer to protect it. The regulations also give individuals more agency over their data, with a right to receive a copy of what data a company has about them and to compel that their data be erased. Crucially for some artificial intelligence and robotic processing applications, is the right to not be subject to an automatic decision based on the processing of data.
The key is personally-identifiable data versus anonymized data. Personal data includes obvious information such as name and customer number, but broadly includes any data that can be used to identify an individual, whether that is by name or otherwise. GDPR regulations also apply to pseudonymized data where a person’s identity can be derived from it.
Big data is often automatically collected and already anonymous – for example a stream of data showing where website visitors tend to drop off while applying for insurance, or aggregated telematics data showing how many customers drive at night. However, even in these cases, gathering a customer’s data requires their consent, and the choice to opt out.
Getting customers to opt in
Customers may choose to give companies data in exchange for a benefit such as discounts or information. Direct Line, for example, has an optional telematics program for their car insurance. Young drivers can install a telematics device in exchange for a discount. Drivers can also access statistics on braking, acceleration, and other data so they know where they need improvement.
One up-and-coming insurtech, Trunomi, is making it easier for companies to request and capture customer consent. Their distributed ledger stores this consent securely in an immutable record, harnessing blockchain technology to ensure GDPR compliance. Another startup, Port, offers an SaaS service to help companies become GDPR compliant, by connecting data across applications, generating data agreements and providing tools for controlling access.
Other GDPR effects on insurance
Another important aspect of GDPR is data portability. The customer now owns their data, not the insurer, and they have the right to access and take their information – all of it, including all that telematics data – elsewhere.
Insurtech Wefox is supporting data portability by giving customers a platform to store all their insurance data. Founder Julian Teicke sees this as “an independent, global data intermediary – a sort of ‘UN for data.’” As sensors gather data, insurers and brokers on the platform can act as “life coaches,” helping customers make sense of their data and discover ways to mitigate their risk in driving, health and life.
“The incumbents from today, which have amassed huge amounts of data can no longer claim that this data is their own asset,” points out Utena Treves, VP Business Development and Strategy at Wefox. “Upon request, insurers will have to allow that these data will be transferred to a third party – maybe a young InsurTech.”
“The incumbents from today, which have amassed huge amounts of data can no longer claim that this data is their own asset. Upon request, insurers will have to allow that these data will be transferred to a third party – maybe a young InsurTech.” – Utena Treves, Wefox