You want to take out insurance – for your car, your house, your possessions – so what’s the insurance company interested in? It used to be where you live, how old you are, the value of your car/house/possessions and there are probably a few questions about security. There’ll be other factors too, but these are likely to be the key points that will determine risk and, therefore, pricing. Within a few years, that’s likely to change.
Insurance companies now have access to a wealth of data and the ability to mine that to carry out a more granular risk assessment. Hundreds (or even thousands) of points that are insignificant in themselves can be identified, assessed and packaged together to produce a more personalised risk assessment for the customer with the premium being priced accordingly.
A lot of this information is expected to come from customers, who will need to present their ‘best self’ to insurers to get the best deals. And that will require sharing data with a prospective insurer; otherwise, you could lose out on the best offers.
I’ve used the example of insurance and an insurer, but it could have been a credit card issuer, an unsecured loan provider or a mortgage lender. Data are, increasingly, in the hands of the customer and the trend is for customers to have control over their data, but it seems that sharing of data will be essential to get the best deals.
Towards the end of last year, I asked a senior executive at an insurer whether this will mean that someone who doesn’t want to share their data might not get as good a deal. What was interesting was the way in which the question was answered. It was as though I hadn’t been keeping up with the rest of the class: of course those customers wouldn’t get as good a deal.
I don’t know exactly what data financial services companies will want to use, but the types I’ve heard about are:
- Social media – Facebook, Instagram, Twitter and the like.
- Health data from Fitbit and similar devices.
- Information about other financial services products, current account information being the holy grail, closely followed by credit card account data; they show where the money goes.
Presenting your best digital self might spell the end of posting that it’s taken you only two hours to travel from Birmingham to Newcastle, which almost certainly means you drove above the speed limit. And you might want to use cash to buy your daily coffee rather than having a lender passing judgement on the weekly spend that shows up on your credit card statement. Access to medical data could provide a rich data source for financial services companies too, particularly insurers, but would you want to share all the (potentially irrelevant) details of your medical history with them? It might make the best deals just that bit too pricy.