Expect insurance and wellness companies to monitor social data, then reward –and penalize member actions.
Companies Want Accurate Customer Data and Social Data Promises a Gold Mine
In our recent research report on Social CRM, we studied how companies will use social data to amend existing customer databases. We mapped out which use cases are ready now, and which ones we expect to see in the future. We expect in the future that companies will give customers an improved customer experience, or improve innovation of products and services by using customer data. (SCRM use cases: CX1, 2 and I1). Just as companies use previous purchasing behavior, demographics, psychographics and other studies, we expect companies to take advantage of the social data that customers are providing to the public, in order to make better decisions.
Insurance Companies Already Influence Rates Based on Historical Behavior
Nothing new here. Insurance and Healthcare companies want safe and healthy customers. In fact, AllState’s mantra of rewarding good drivers with lower rates has been the mainstay of their advertising blitz. Health companies like Kaiser encourage members to participate in ‘Wellness programs‘, to increase overall awareness of healthy lifestyles and health. We already know that age, health, and behavior is already factored into rates, so we should expect insurance companies to extend their programs to also include social data.
Hypothetical? Actually, it’s already happened. We know of this Canadian woman who claimed medical disability, but was soon denied after the employer and insurance company discovered Facebook pictures of her on a beach.
Three Ways Companies Can Influence Rates Based on Social Data
Using a variety of Social CRM techniques (like the ‘5Ms’ to map social profiles to existing customer records), companies can conduct the following three use cases:
- Monitor and glean intelligence: These insurance companies could monitor what members are saying, then offer suggestions on wellness, activities, and being healthy. Overtime, they can develop intelligence and eventually predictive models based upon members published information and their overall well being. Expect companies to quickly be able to size up new members based upon their existing social behaviors online in order to influence the packages and rates they’ll offer.
- Penalize ill-behavior: Insurance companies could monitor customers, and those that participate in a negative way online could be penalized. Example: Checking into bars four times a week consistently when it’s not your job could yield a 10% increase. Anyone who earned the “Crunked” badge (going to four places in one night, referring to binge drinking) could receive a 10% increase in fees (unless of course, you’re the Budweiser delivery person). Or, anyone posting pictures of them skydiving or any picture while driving on the freeway from the drivers seat, would yield an increase in car insurance.
- Reward members with pro-wellness activity: Rather than punish bad behavior, insurance companies could incentivize members to participate in pro-health programs. For example, members that regularlly publish their stats to Nike Plus, a system that connects Nike Shoes, iPods, and the internet to track running stats, could benefit from a decrease in health rates. Or, people that frequently check into healthier food alternatives like Trader Joes or Whole Foods, rather than a fast food place, may have a decrease in insurance rates for the family.
Yet ‘Social Insurance Rates’ Fraught with Challenges
Web strategy is all about tradeoffs, to get a benefit, you have to give up something, here’s the risks as I see them.
- The data may not be accurate. Just because someone indicates they’ve gone to a bar doesn’t mean they’ve indulged in Irish car bombs till the sun goes down or even drank at all. Don’t expect all checkins, self-expressions to be accurate on how they are actually living.
- The data could be gamed: it’s difficult to tie actual confirmation of said activities with the reality that they have. Anytime rules are set in place, there are opportunities to game it, expect loopholes and automated publishing tools to misrepresent actual behavior.
- Members will clam up to evade the ‘stick’: If customers know that data they publish will be used against them, they’ll lock up the data and not make it public. Instead, they’ll just make their data available to their friends and trusted confidants –no longer public.
- Legal implications unexplored: We’ve not even explored how companies may be put at risk by using public information for or against members, which would result in a new class of legal services, great.
Conclusion: Expect Companies to Offer Opt-In Programs for “Social Insurance Rates”
To combat the above mentioned risks, I would expect health and insurance companies to offer an opt-in method for existing wellness programs to be extended to tools like online education courses, participating in wellness programs with peers (like Nike Plus) or allowing members to submit location based checkins to the gym, healthy eating, and other pro-health activities. We should expect that a forward-thinking insurance or wellness company offers an online incentive based program to encourage members to connect to each other, become more educated, and live a healthy lifestyle.
(The Social CRM Pioneers online group is already have a discussion around this topic, join in here). Update: Marketing Vox has extended the conversation and pointing out some other examples of how financial services firms are looking at social data. See how Rapleaf aggregates your online reputation, and how financial services firms are using it. I assert this isn’t much different than credit scoring systems already in place. )
Update Nov 21, 2010: NYT Article
New York Times: Insurers Test Data Profiles to Identify Risky Clients. Despite various viewpoints in the comments, there’s already signs that insurers are exploring new types of data, here’s a quote on how some data companies are scraping social info:
“Increasingly, some gather online information, including from social-networking sites. Acxiom Corp., one of the biggest data firms, says it acquires a limited amount of “public” information from social-networking sites, helping “our clients to identify active social-media users, their favorite networks, how socially active they are versus the norm, and on what kind of fan pages they participate.”
Love the discussion you prompted, Jeremiah. I like the opt-in idea. Self-reporting via social site opt-in will get consumer buy-in (just like offline self-reporting does.) I don't know that people will be comfortable with insurance firms sizing them up (without permission) via consumers' social site behaviors.
Love the discussion you prompted, Jeremiah. I like the opt-in idea. Self-reporting via social site opt-in will get consumer buy-in (just like offline self-reporting does.) I don't know that people will be comfortable with insurance firms sizing them up (without permission) via consumers' social site behaviors.
Uhm most insurance in the United States is highly-regulated, both at the federal and state level. A good portion of these regulations deal with rate setting, and the factors that are used in rate setting. For instance, in the auto insurance market, some states do not permit gender to be used as a factor in rate setting, while others do. In some states, an evaluation of your financial responsibility can be factored in, whereas in other states it cannot. As a rule of thumb, insurance companies can not come up with arbitrary factors that aren't first approved by the appropriate insurance regulators.
I don't know why you even mentioned health insurance given the new federal healthcare law, which essentially has the purpose of doing exactly the opposite of what insurance is really all about (pricing a policy based on actual risk).
Bottom line: insurance companies will not include “social factors” simply because in just about every insurance market in the United States, they cannot by law. Furthermore there is no actuarial basis to do so, so it is unlikely that you will ever see an insurance company seek approval for “social” factors.
Uhm most insurance in the United States is highly-regulated, both at the federal and state level. A good portion of these regulations deal with rate setting, and the factors that are used in rate setting. For instance, in the auto insurance market, some states do not permit gender to be used as a factor in rate setting, while others do. In some states, an evaluation of your financial responsibility can be factored in, whereas in other states it cannot. As a rule of thumb, insurance companies can not come up with arbitrary factors that aren't first approved by the appropriate insurance regulators.
I don't know why you even mentioned health insurance given the new federal healthcare law, which essentially has the purpose of doing exactly the opposite of what insurance is really all about (pricing a policy based on actual risk).
Bottom line: insurance companies will not include “social factors” simply because in just about every insurance market in the United States, they cannot by law. Furthermore there is no actuarial basis to do so, so it is unlikely that you will ever see an insurance company seek approval for “social” factors.
We're taking social reputation too seriously, let's not forget most people still “don't get it” even if they're on it. Your pipe dream of implications is borderline Orwellian, and the logistics behind affecting insurance rates based off of social interaction puts these services and their userbase at a much larger risk.
We're taking social reputation too seriously, let's not forget most people still “don't get it” even if they're on it. Your pipe dream of implications is borderline Orwellian, and the logistics behind affecting insurance rates based off of social interaction puts these services and their userbase at a much larger risk.
I'm hesitant to share this info with certain, feet-dragging, slow adopters of social media. It gives them more doubts and more reasons to ignore social media.
I'm hesitant to share this info with certain, feet-dragging, slow adopters of social media. It gives them more doubts and more reasons to ignore social media.
How much different is it than prospective employers searching your activities online before making hiring decisions? It seems fairly similar to me.
How much different is it than prospective employers searching your activities online before making hiring decisions? It seems fairly similar to me.
I felt this way about Blippy as well- do you really want everyone to know everything you are buying or doing? How much information is too much? How much creates an evidentiary trail that eventually, becomes an obligation to investigate, instead of just for the nosy?
I think this is the reason for the Facebook alternative, Diaspora- people want to be able to talk openly and find like-minded friends, but (absurd made up example) might not want everyone to know they've had to join knitter's anonymous for an unhealthy attachment to cashmere. People want to share, but don't always want to be held to that information in a public forum. And too few people view everything they post online and being attached to them potentially forever.
I felt this way about Blippy as well- do you really want everyone to know everything you are buying or doing? How much information is too much? How much creates an evidentiary trail that eventually, becomes an obligation to investigate, instead of just for the nosy?
I think this is the reason for the Facebook alternative, Diaspora- people want to be able to talk openly and find like-minded friends, but (absurd made up example) might not want everyone to know they've had to join knitter's anonymous for an unhealthy attachment to cashmere. People want to share, but don't always want to be held to that information in a public forum. And too few people view everything they post online and being attached to them potentially forever.
For the record, I am not commenting while driving. Really. State Farm, please make a note of that.
For the record, I am not commenting while driving. Really. State Farm, please make a note of that.
Small point of order, FourSquare awards the “crunked” badge for going to any four places in an evening. I earned one for going to the library and three grocery stores looking for specific ingredients (at the stores, not the library), and alcohol wasn't purchased at any. I didn't even check a bartenders guide out of the library. 😉
Small point of order, FourSquare awards the “crunked” badge for going to any four places in an evening. I earned one for going to the library and three grocery stores looking for specific ingredients (at the stores, not the library), and alcohol wasn't purchased at any. I didn't even check a bartenders guide out of the library. 😉
Sorry, Jeremiah. I don't think you understand. The fact that somebody SUSPECTS a financial services firm used a Facebook account to verify somebody's identity is 110% irrelevant. And using social media to help verify a person's identity is completely different than using it to set an insurance policy rate (or make a lending decisions, which are also typically governed by state and federal lending laws).
Again, most insurance markets in the United States are highly-regulated at the state and federal level. How insurance companies set their rates in these markets, and what factors they use, is NOT something that they can arbitrarily change on a whim.
I'm glad you mentioned credit scores. Again, in the auto insurance market, for example, some states do not allow insurance companies to look at your credit history as part of their rate setting. Others do. THESE THINGS ARE PERMITTED OR FORBIDDEN BY STATUTE.
Also permitted or forbidden by statute: what insurance companies can provide discounts for. In California, for instance, the recently defeated Prop 17 would have changed the law so that insurance companies could provide a persistency discount for new customers who were previously with another insurance company. Right now, they can't. I hope you see how this works: almost EVERYTHING an insurance company can or can't do is guided by an ungodly number of of state and federal statues.
Finally, you should understand that when it comes to rate setting, insurance companies don't have an interest in setting rates arbitrarily. The financial stability of the insurer (and almost every statute you will find) requires that rate setting be based on models that are ACTUARIALLY SOUND. In other words, that means that the insurer has to be able to associate the factor to the risk it assumes, and the price it charges.
The “risks” section of your post basically details precisely why an insurer would never even suspect that somebody's tweets could play a role in an actuarily sound model – there is no rational basis for believing this!
IMPORTANT SIDE NOTE
I would point out that much of your post addresses health insurance, which is now the most highly-regulated form of insurance in the country. Ironically, health insurance really isn't “insurance” in many cases, and it certainly won't be once the full healthcare reforms go into effect.
Already in 11 states, community rating is used in some form or another. The basic goal of community rating is to ensure that everybody pays the same rate. This means that healty individuals pay the same rate as unhealthy individuals. There is no reward for good behavior.
You should understand that healthcare reform makes community rating the law of the land. The young will subsidize the old, the healthy the sick. Starting in 2014, for instance, you can't be denied coverage based on a pre-existing condition. And a policy's premium for a senior cannot be more than double the premium charged to young person, even though in the real world, the actual cost difference for the insurer is 5:1 and greater.
Bottom line: healthcare reform renders your wellness-related suggestions moot. THEY ARE NOT COMPATIBLE WITH THE LAW.
I respect that you may be a social media expert, but I think you do your firm a disservice by making industry-specific suggestions when you clearly haven't run your ideas by someone who actually has experience with the industry.
Sorry, Jeremiah. I don't think you understand. The fact that somebody SUSPECTS a financial services firm used a Facebook account to verify somebody's identity is 110% irrelevant. And using social media to help verify a person's identity is completely different than using it to set an insurance policy rate (or make a lending decisions, which are also typically governed by state and federal lending laws).
Again, most insurance markets in the United States are highly-regulated at the state and federal level. How insurance companies set their rates in these markets, and what factors they use, is NOT something that they can arbitrarily change on a whim.
I'm glad you mentioned credit scores. Again, in the auto insurance market, for example, some states do not allow insurance companies to look at your credit history as part of their rate setting. Others do. THESE THINGS ARE PERMITTED OR FORBIDDEN BY STATUTE.
Also permitted or forbidden by statute: what insurance companies can provide discounts for. In California, for instance, the recently defeated Prop 17 would have changed the law so that insurance companies could provide a persistency discount for new customers who were previously with another insurance company. Right now, they can't. I hope you see how this works: almost EVERYTHING an insurance company can or can't do is guided by an ungodly number of of state and federal statues.
Finally, you should understand that when it comes to rate setting, insurance companies don't have an interest in setting rates arbitrarily. The financial stability of the insurer (and almost every statute you will find) requires that rate setting be based on models that are ACTUARIALLY SOUND. In other words, that means that the insurer has to be able to associate the factor to the risk it assumes, and the price it charges.
The “risks” section of your post basically details precisely why an insurer would never even suspect that somebody's tweets could play a role in an actuarily sound model – there is no rational basis for believing this!
IMPORTANT SIDE NOTE
I would point out that much of your post addresses health insurance, which is now the most highly-regulated form of insurance in the country. Ironically, health insurance really isn't “insurance” in many cases, and it certainly won't be once the full healthcare reforms go into effect.
Already in 11 states, community rating is used in some form or another. The basic goal of community rating is to ensure that everybody pays the same rate. This means that healty individuals pay the same rate as unhealthy individuals. There is no reward for good behavior.
You should understand that healthcare reform makes community rating the law of the land. The young will subsidize the old, the healthy the sick. Starting in 2014, for instance, you can't be denied coverage based on a pre-existing condition. And a policy's premium for a senior cannot be more than double the premium charged to young person, even though in the real world, the actual cost difference for the insurer is 5:1 and greater.
Bottom line: healthcare reform renders your wellness-related suggestions moot. THEY ARE NOT COMPATIBLE WITH THE LAW.
I respect that you may be a social media expert, but I think you do your firm a disservice by making industry-specific suggestions when you clearly haven't run your ideas by someone who actually has experience with the industry.
What a total bunch of crap. I have 40 yrs. of experience in the insurance business and insurance companies are NOT using social web sites to “spy” on their customers. Next, the author will be telling us that the sky is falling, lol