What if your insurer kept track of your online data to determine the price of your auto insurance? Seems far-fetched, right?
Yet there is predictive value in the digital traces we leave online. And insurers can use data collection and analysis tools to find our data and use it to price insurance services.
In one example, US insurance broker Jerry analyzed the driving behavior of some 20,000 people to conclude that Android users are: safer drivers than iPhone users. What prevents insurers from referencing such reports to price their insurance?
our newest Research shows that Australian consumers have no real control over how data about them, and posted by them, may be collected and used by insurers.
Looking at several examples of customer loyalty programs and social media, we found that insurers have access to massive amounts of consumer data under the Australian weak privacy laws†
Your data is already there
Insurers are already using big data to price consumer insurance through personalized pricing, according to evidence gathered by industry regulators in the United Kingdom† European Union and United States†
Consumers often “agree” to all kinds of data collection and privacy policies, such as those used in loyalty programs (who doesn’t like free stuff?) and by social media companies. But they have no control over how their data is used once transferred.
There are far-reaching conclusions that can be drawn from data collected through loyalty programs and social media platforms – and they can be inconvenient or even highly sensitive.
Researchers using data analytics and machine learning have claimed to build models that can guess a person’s sexual orientation based on photos of their faceor their suicidal tendencies of posts on Twitter†
Think of all the details that emerge from the history of grocery shopping alone: diet, household size, addictions, health problems, and social background, among other things. In the case of social media, a user’s posts, photos, likes, and links to various groups can be used to create an accurate picture of that person.
What’s more, Australia has a Right to consumer data which already requires banks to share consumers’ banking details (at the consumer’s request) with another bank or app, for example to access a new service or offer.
The regime is actively expanding to other parts of the economy, including the energy sector, with the idea that competitors can use energy consumption information to make competitive offers.
Consumer data law is advertised as: empowerment for consumers – giving people access to new services and offerings, and giving people choice, convenience and control over their data.
In practice, however, this means that insurance companies accredited under the program may require you to share your banking information in exchange for insurance services.
The previous coalition government also proposed “open financing”, which would extend the right to consumer data to include access to your insurance and pension data. This has not happened yet, but it is likely that the new Albanian government will look into it.
Why more data in the hands of insurers can be bad news
There are plenty of reasons to be concerned that insurers are collecting increasingly granular data about people and using it for insurance pricing and claims management.
First, large-scale data collection provides incentives for cyber-attacks. Even if data is kept in anonymized form, it can re-identified with the right tools.
Insurers can also infer (or at least think they can infer) facts about a person that they want to keep private, such as their sexual orientation, pregnancy status or religious beliefs.
There is ample evidence that the results of artificial intelligence tools used in mass data analysis can be inaccurate and discriminatory. Insurers’ decisions may then be based on misleading or untrue data. And these tools are so complex that it’s often difficult to figure out if, and where, errors or biases are present.
While insurers aim to pool risks and compensate the unfortunate, some may use data to offer only affordable insurance to those at very low risk. Vulnerable consumers may face exclusion†
More widespread use of data, especially through Consumer Data Law, will be especially detrimental to those who cannot or do not want to share data with insurers. These people may be low risk, but if they can’t or won’t prove it, they will have to pay more than a reasonable price for their insurance coverage.
They may even pay more than they would in a pre-Consumer Data Right world. So insurance can move further at a fair price when more personal data is available to insurance companies.
We need immediate action
U.S previous research demonstrated that, apart from anti-discrimination laws, there are insufficient restrictions on how insurers may use consumer data, such as data from online sources.
The more insurers base their assessments on data that a consumer has not provided directly, the more difficult it will be for that person to understand how their “risk” is being assessed. If an insurer requests your transaction history for the past five years, do you know what they are looking for? Such problems will be exacerbated by the expansion of consumer data law.
Interestingly, insurance companies themselves may not knowing how collected data translates into risks for a specific consumer. If their approach is to simply feed data into a complex and opaque artificial intelligence system, all they know is that they are getting a supposedly ‘better’ risk assessment with more data.
recent reports of retailers collecting data from customers for facial recognition have demonstrated the importance for the Albanian government to urgently reform our privacy lawsand take a closer look at other data laws, including proposals to extend the right to consumer data†
- Zofia BednarzLecturer in Commercial Law, University of Sydney† Kayleen ManwaringSenior Research Fellow, UNSW Allens Hub for Technology, Law & Innovation and Senior Lecturer, School of Private & Commercial Law, UNSW Law & Justice, UNSW Sydneyand Kimberlee WeatherallProfessor of Law, University of Sydney