Report: Insurers to Make Greater Use of Policyholders’ Social Data

With the use of Twitter, Facebook and other social networking sites increasing among all age groups, a new report predicts it will soon be standard practice for insurance companies to use what people post about themselves online to help gauge their risk as clients.

The authors of the report, which was released last week by Boston-based research and advisory firm Celent, say that over the next three years, insurers will begin using information gathered routinely from social media to determine risk in much the same way that auto insurers in some states use policyholders’ credit histories.

“The information that is posted by individuals on multiple sites reflects their preferences, lifestyles and habits,” Mike Fitzgerald, a senior analyst with Celent’s insurance group and co-author of the report, said in a statement. “Postings from companies include descriptions of product offerings, services, and operations. In both cases, this social data can be used to build a real-time risk profile.”

Insurers Already Using Social Media in Claims Investigations

According to Celent, insurance professionals report that they already refer to social networks during the early stages of investigations of questionable claims.

“The rise of social networks has led to people collecting incriminating evidence about themselves and offering it to insurers,” the authors of the report write.

One example of this is when an individual claimed “a debilitating, work-related back injury.” But when the investigator checked out the claimant’s social media profile, there were photos of the individual performing activities like breakdancing.

Celent reports that investigators primarily use social data to establish grounds for deniability, identify sources of income, collect “additional evidence in litigation” and discover information the claimant has hidden from the insurer.

Social Media Use Varies among Age Brackets

Not surprisingly, young people are more plugged in than other age groups, with 77 percent of American 18- to 29-year-olds using social networks, as compared with 55 percent of those from 30 to 49 and 23 percent of people 50 or older.

But social networking increased for all age groups between 2008 and 2010, with the greatest increase—34 percent—among those 56 to 65 and use among 45- to 55-year-olds climbing by 30 percent.

The study notes that those age brackets represent target markets for many insurers, including those who provide commercial business, life and annuities coverage.

The Practice Remains in Its ‘Formative Stages’

Celent researchers say some individual underwriters are already gathering valuable information on their policyholders by performing manual searches of social media, but they say a more systematic approach will yield greater results.

According to the report, enthusiasm for “the potential of these new approaches must be tempered by the recognition that use of social data is in its formative stages,” and many legal and ethical issues have yet to be sorted out.

“However, it also must be remembered that, at one time, previous innovations such as multitiered automobile pricing (and) predictive analytics … were viewed as optional changes to longstanding insurance processes,” the report states.

One method of gathering data that should be considered, according to the report, is seeking permission from potential customers to use their information and possibly offering discounts to policyholders who do so, including those who are checking car insurance quotes online in search of the best deals. This would allow insurers to gain access to information that might otherwise be off-limits.

The authors note that there will be challenges, including developing methods to extract, analyze and authenticate data, and the fact that regulation of social networking is evolving slower than the technology and could have an impact on the use of data.

But “Celent believes that the use of this data in other processes is a natural evolution of insurers’ engagement with customers,” the report states. “Insurers already improve customer experience by leveraging third-party data and, over time, social data will be added to this mix.”

About Gregor McGavin
Gregor McGavin is an award-winning journalist who has reported across the country for such publications as The Associated Press, the Arizona Republic, the Pittsburgh Tribune-Review and the Press-Enterprise.

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