Insurance Companies Data Mine Your Death

Everything from what magazines you buy to how much television you watch could be used by insurance companies to determine whether you’re a risky client or not, and when you might die.

Traditionally used for advertising, a company is shopping around to insurance companies data-mined customer profiles as a way to evaluate risk. In one example showcased in a recent PowerPoint before the Society of Actuaries, the company showed two hypothetical customers, “Sarah” and “Beth.”

Sarah reads design and travel mags, has a short commute, runs and bikes, and watches little TV.

Beth has a 45-mile commute, divorced with no kids, buys fast food and diet and weight loss products, and is and avid TV watcher.

Based on that, the consulting firm would recommend that the insurance company go after Sarah with new business and retention efforts and quickly give her a preferred policy. On the other hand, they would recommend not sending Beth offers or using more aggressive retention methods, and would recommend getting more tests on her.

Testing out the system, one insurer said it was pretty “persuasive” in how close it came to the results they get with traditional underwriting techniques.

Data mining has long been used for targeted advertising, but if this method was implemented for insurance, it’s questionable whether it would be subject to the Fair Debt Collection Practices Act.

Even if you’re careful about what information you put out there, it’s hard when companies do backend deals to sell your data all over the place. You never know where it’s going to end up.

Here’s the source powerpoint, “Improving Life Insurer Performance with Predictive Analytics” (PDF) (skip to page 18) [SOA]

Insurers Test Data Profiles to Identify Risky Clients [WSJ]

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  1. Rocket says:

    So, they wanna discriminate against what people like to do?

    • TuxthePenguin says:

      Its not really that. The most easily associated link to this is with life insurance. The greater your chances of death, the more that a policy (should) cost you. However, there are plenty of things that can influence your chance of death that are not caught on most application forms. Using data mining might tease a few more of these out.

      Remember – insurance is about hedging a large, uncertain future risk for a monthly payment. IE, you’d rather pay $10 a month than face the lose of your spouse and his monthly income. All that these do is make the ability of judging that risk and therefore have a more accurate premium.

    • George4478 says:

      Discriminate based on what people do is not necessarily “against” what people do.

      Exercise is good, so a person who exercises gets a better deal. That is not “against” that person.

      So, it benefits some, doesn’t benefit others – like just about everything else in this world.

    • Loias supports harsher punishments against corporations says:

      Insurance underwriting is the definition of discrimination – but it’s a stretch to call it the bad kind of discrimination. They use statistical data to determine your level of risk.

  2. Aking0667 says:

    Why are companies allowed to sell my personal information in the first place? If I went and sold the exact location of all the CEOs assets to the IRS and a bunch of criminals I’d be willing to bet that I’d be getting a huge prison sentence.

    • balthisar says:

      Why do you think it’s your personal information? It’s information about you, but it’s not your information. It belongs to whomever compiled it.

      • Aking0667 says:

        Working for an advertiser?

        The information such as my name, location, ssn, date of birth, my habits, etc. is all my information, if I choose to give it to your company you are not allowed to sell it without my permission. Its hard to parallel it but I think the closest thing would be sort of like copyright, as in its my material and you can’t just take it and do what you will with it without my permission. You can’t force me to give you my permission. And the RIAA will litigate the crap out of you if you do (this part would be nice, but pigs probably need to fly first).

        • balthisar says:

          No, I’m not an advertiser, and I don’t like the situation either. I like my privacy. But regardless of what I like, and what we all think an ideal world would look like, that’s not how the real world works. For example, you say, “The information such as my name, location, ssn, date of birth, my habits, etc. is all my information, if I choose to give it to your company you are not allowed to sell it without my permission.” (emphasis mine). Where’re the laws that say that? Where are all of your contracts with every single entity that you do business with the prohibits them from using information that you gave them? The fact is, we’ve given all of this information away, and they’ve compiled it, and now it belongs to them.

          There’s no difference between today and when phone books were first published. There’s no difference between between that and selling your eyewitness story about your cannibal neighbor to a tabloid for cash (those dinners were his information, not yours).

          • Aking0667 says:

            Should there need to be laws, that say I own my name, the space my mass takes up at the current moment, the moment I was born? It should be implied, and if it has to be put on paper to make people respect privacy then so be it.

            There are no contracts specifically saying they can do what they want with my information.
            -If I had compiled a persons name, phone number, address, dob, ssn and sold it I’m pretty sure that would be considered identity theft.

            I’m no lawyer but I’m pretty sure you have to be aware and willing for it to be considered giving it away.

            I’d say there is a difference there, I am selling my account of what happened, not what actually happened. The neighbor could sell what actually happened.

            • stevenpdx says:

              And how many times have you checked the “I agree” box when you sign up for a website, or subscribe to a mazgazine, or use your grocery store preferred card, without actually reading the terms, conditions and privacy policy you’re agreeing to?

              You can’t think for one instant that companies collect your information and do nothing with it. They SELL it to data-mining/data aggregating companies.

              This is partly why, for example, that even though you pay off your credit card in full every month and never pay interest, the credit card issuer still makes money off of you. They collect your spending habits, zip code, birthdate, etc and SELL that data. And you agreed to it.

              • pythonspam says:

                Even if you pay the card off every month and the credit card company DOESN”T sell your information, they still get their cut from merchant exchange fees that they charge on every transaction. That’s why more and more merchants are pushing for cash discounts or debit transactions processed through ACH.

                • stevenpdx says:

                  Very true. Credit card transaction fees make every card user profitable, whether they pay interest or not. Add to that the data-mining and other ways card issuers make money, and most accounts are profitable.

  3. iggy21 says:

    This is a hypothetical, not an actual practice.

  4. iggy21 says:

    Actually, the more i think about this, this can be a very good thing.

    If people with extremely risky lifestyles kept getting high amounts of insurance with very low premiums, the insurance companies wouldn’t last. They’d have to pay out too many claims, and would see the income to replace it. Then, everyone would blame the insurance companies when they increase their premiums ten-fold, or go out of business and drop coverage all together.

    The more accurate they can decide an individuals risk, the better we are. This practice can actually lead to lower premiums for the majority, rather than sky-rocketed rates for everyone. Of course, the people that leas ‘risky’ lifestyles have to except the consequences of said life style. (If you eat McD’s everyday, yous should anticipate a heart attack,… but so should the insurance company :) )

    • Nigerian prince looking for business partner says:

      I think the problem is transparency. It would essentially create some kind of health credit report with the potential for some serious privacy violations.

    • Michaela says:

      +1

    • iggy21 says:

      I’m going to give myself a ‘-1′ for grammar

    • kennedar says:

      ITA. My brother is a pilot and a licensed scuba diver. He knows that he will never be able to get “normal” life insurance. It was one of those things that was told to him in flight school. There are high risk pools that he qualifies for though, and in a few years when he buys a home, he will have to sign up for one of them. (He is currently 22, unmarried, no kids, and lives with my parents, he really does not need life insurance right now)

    • dangermike says:

      The whole point of insurance is that you join a group which cooperates financially. Fairness would dictate similar rates for all involved, and higher rates if risk is not mitigated. If every single individual has a unique rate, it’s not insurance anymore. It’s just fiscal management. Only a third party will be benefiting from the interest earned on your money. And if the sentiment is to “urge” people to behave in a certain manner, well then that’s just straight up fascism.

      • iggy21 says:

        That’s not accurate. You can join group insurance policies to get a standard rate (which everyone shares since the insurance is a group policy).

        You can also join group’s that offer discounted insurance rates to individuals to group members (individual underwriting is sill necessary, but your rates will be discounted, due to the fact that youre group usually has an exclusive deal with and insurance company).

        Or, you can find an individual plan (you get no special discount, but you do have the option to shop around for the lowest price).

        2 of these 3 common insurance paths will most definitely require different rates for each individual based on their plan, risk factors (like age and smoking), etc. (go out and try to get life (not health) insurance , and you’ll see what I mean.)

        • dangermike says:

          I don’t think what you’ve said is necessarily contrary to my own statement. I know that insurance rates can vary between individuals and groups, and that those varying rates are generally based on risk. What I’m saying is that doing things that way diverges from the pure concept of what insurance is, and that taken to its logical end (infinite granularity with wholly individual rates for every member), it no longer resembles the concept of insurance since every member will basically be covering their own risk rather than drawing benefits from being a member of the large class (insurance holders) they belong to.

  5. Jane_Gage says:

    Beth is probably going to mow Sarah over when the massive coronary hits.

  6. DanRydell says:

    “Data mining has long been used for targeted advertising, but if this method was implemented for insurance, it’s questionable whether it would be subject to the Fair Debt Collection Practices Act.”

    Who is raising that question and why?

  7. Kimaroo - 100% Pure Natural Kitteh says:

    My concern about this is whether the information they are looking at is accurate. How can I check and make sure that this information, that is supposidly about me, is actually correct? I started googling and searching for myself on those sites that promise to give you information, and I was pretty shocked to see how wrong some of it was. It was really, really wrong. (Like, doubling my age, for example.)

    I don’t like the idea of these companies using this data anyway, but if they are there should be a way to make sure that it is accurate, at the very least.

    • qwickone says:

      That’s what I’m worried about too. Plus, what if I’ve managed to keep most of my information away from them and they only have the worst data about me? For example, I watch a lot of TV, but I also work out a lot. What if I pay my trainer in cash? Then it just looks like I watch a lot of TV, so I’m more likely to be unhealthy. Plus, there are lots of people with recurring gym memberships charged on their CC, but they don’t go. I feel like it’s in my best interest to have ALL my info out there or nothing. Since I know there’s some info already out there, should i just stop protecting my info so fiercely?

      • Azzizzi says:

        How do they know whether you’re an avid TV-watcher or not?

        • Nigerian prince looking for business partner says:

          By how much you pay a cable company each month?

          • myCatCracksMeUp says:

            That might be how they do it, but it would be inaccurate in my case. We pay for premium HD cable with HD DVR, but I watch very little.

            And I work out a lot, but since my hubby (who doesn’t work out very often at all) was the one who used his credit card to pay for our membership, they probably have me down as not exercizing at all.

  8. danmac says:

    Does this mean that if I like to buy twinkies and throw them at fat people, my life insurance premium may go up? How uncouth!

  9. ZIMMER! says:

    WoW how disturbing is that?! It is called discrimination.

    • llcooljabe says:

      How on earth does the Fair Debt Collection Practices Act apply here?

      Please at least sound credible when you make things up, perhaps with a link to a source making this claim?

      • ZIMMER! says:

        Did I say anything about Fair Debt Collection Practices Act? No, perhaps you are responding to someone else. I wrote “WoW how disturbing is that?! It is called discrimination.”

  10. B says:

    So I should cancel my subscription to Extreme Glass Eating Monthly if I want my insurance premiums to go down.

  11. Scoobatz says:

    I don’t undertstand the TV part. For the life of me, I can’t figure out how anyone could determine how much TV I watch (not including my family). Similarly, how would anyone know how much fast food someone eats before quoting them a policy?

    • Mom says:

      Where do you spend more money? Best Buy or REI? Cheesecake Factory, or the produce section of the supermarket?

      I’ve make it overly simplistic, but data mining people are experts at making those kinds of connections. If they have the data, they are perfectly capable of putting a pile of data about purchasing patterns and health onto a computer coming up with connections between the two.

  12. llcooljabe says:

    How on earth does the Fair Debt Collection Practices Act apply here?

    Please at least sound credible when you make things up, perhaps with a link to a source making this claim?

  13. CentralScrutinizer says:

    Pay cash for all “controversial” purchases (fast food, cigarettes, booze, etc.).

    Also, this is a good reason not to sign up for a supermarket discount card. The insurance companies would love to know who the junk food junkies are, and the supermarket chains won’t think twice about selling the data!

    • omg says:

      So if Mom picks up potato chips for her kids (or for Dad’s football party) on her shopping trip, how does that make HER a higher-priced risk?

  14. DovS says:

    The problem with data-mining, apart from the privacy issues, is that, just from looking at my spending history, there is no way for them to look at my purchases of junk food and health food and know which of them is being eaten by me and which is being eaten by my girlfriend.

    On the other hand, I suppose it could work in our favor. If we buy an exercise bike, there is no way for them to know whether we actually use it but the purchase alone might make us look more appealing to insurers.

    • stevenpdx says:

      They’re really not looking for information that granular. They look for trends by zipcode, birthdate, income level, etc and take that information in the aggregate to use.

  15. omg says:

    I see a marketing opportunity…how many people would be thrilled to sign up for a credit card that guarantees to NOT sell your info?

  16. Levk says:

    is ok is ok indeed if insurance company not willing to insure me then so be it

  17. bananaboat says:

    Coming soon! They’ve already used your credit rating to charge higher premiums under the theory people with debt issues are careless. Some companies give a “discount” for driving low miles so it’s an implied increase for non-low mile drivers. Might as well pick on your personal habits or health history too!

  18. james says:

    This is why all my loyalty cards are not in my name, but in the names of fictitious characters and dead authors. Another approach is to ask for a loyalty card, but tell the store that you’ll have to fill out the form and return it later because “you forgot your glasses”.

  19. Memtex784 says:

    Usually the “nice” people the ones who get creamed on the roads by some worthless drunk who watch Jerry Springer and reads Guns and Ammo along with some p0rno mags. The drunk comes without a scratch most of the time. So who best to insure?

  20. MrHeartOfGold says:

    Hmm, a timely redaction??? Seems that the document now ends at page 17

  21. SWBLOOPERS says:

    For those who think this would result in lower premiums for those of us with less “risky” lifestyles, I repeat a quote I read many years ago:

    “The primary difference between a cost increase and a cost decrease is only the former gets passed on to the consumer.”