Life Insurers Can Use Social Media Data in Underwriting. Should They?

Cons

The cons begin where the New York guidelines start. It suddenly becomes the insurers responsibility to make sure judgement calls made from online data don’t inadvertently cross into discrimination of protected classes. Eager for sales volume, that’s a gray line that a broker might easily cross.

And then there’s a chance, from a simply pragmatic standpoint, that social media data might not always be good data. A potential client who’s been sober for 10-years but happens to work as a bartender might be pegged as a health risk only because the GPS on his mobile device pings him from a saloon every night. These kinds of false positives may actually lead to miscalculations, and potentially, liabilities for the insurer down the road.

The insurance industry itself has been slow to come up with internal regulatory guidance when it comes to using online data, so determining how your company is going to leverage the new tool essentially leaves you out on the frontier with an axe to blaze your own trails. Nothing’s to say the industry, or worse, legislators like those in New York, don’t eventually implement restrictions that could affect what you’re trying to build.

And finally, as most of us know, incorporating new technologies like AI-enhanced algorithms into our legacy systems represents a challenge and a significant expense. It’s a move where early adopters may find it takes longer to realize an ROI and might not be worth the risk until industry standards have jelled.

What Should You Do Now?

Since potential risk and liability aren’t clearly spelled out, one useful strategy to consider is using transparency with the customer.

If the carriers you work with are already using social media data as part of their underwriting processes, or plan to in the near future, you might want to look carefully at their privacy protection disclaimers, and draw up an amendment to your own privacy protection rhetoric, to make it clear that the underwriters use data sets pulled from online resources. In your own disclaimer, you could explain what sorts of data you collect and how you use the information.

While transparency will have its limits with a public that’s not yet aware how online data will affect any number of decisions made about them, it positions the insurer, and the producers, in a far more favorable light should the use of such data be questioned once regulatory action begins to take shape. So, think of transparency as a kind of reputation insurance.

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Brian Byer is the vice president and general manager of Blue Fountain Media, by Pactera Digital, a digital marketing agency.