How Insurance Companies Will Influence Rates Based On Your Tweets: Social Insurance Rates

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.”

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  • Wap

    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

  • Social media “experts” are everywhere these days. Unfortunately most of these so called “experts” are great at telling us what to do but have never done anything themselves. The most recent example is a column by Jeremiah Owyang an industry analyst for the Altimeter Group. (translation: someone who tells us what we should do but who has never done it himself). In his latest “expert” advice insurers are going to monitor social media and base their health coverage and rates on what we post. I wonder what the atmosphere is like on the plantet he lives on ?

    According to Mr Owyang:

    Conclusion: Expect Companies to Offer Opt-In Programs for “Social Insurance Rates”

    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.

    There are a bunch of holes in his conclusions but I’ll just tackle the big ones;

    With insurers insuring millions of people can you imagine the resources needed to monitor their customers via social media ?
    A lot of people do not use social media to tell people “I just went to the gym” or “I had a healthy salad for lunch”.
    It would be easy for someone to drive by a health club and check in to fool people into thinking that they have been there.
    Only 4% of the online population uses their mobile devices to for location services.
    Insurers, despite their complaints, are making money hand over foot right now as less people seek medical care or go to their physicians.
    This is the kind of rubbish that I would expect from someone who spend his life analyzing and never doing anything. These are the social media experts who tell marketers that they should be doing this or that but when it comes to successful programs they have done their resumes are usually null and void.

    Social media gurus too often oversimplify the management challenges of implementing asocial media program. Certainly, people who have good ideas and communicate them well can help organizations. But a focus on gurus masks how business knowledge is and ought to be developed and used. Knowledge isn’t generated by lone geniuses who magically produce brilliant new ideas in their gigantic brains. This is a dangerous fiction. This happens partly because consultants and others who sell ideas and techniques are always rewarded for getting work, only sometimes rewarded for doing good work, and hardly ever rewarded for whether their advice actually enhances

  • Thanks for the thoughtful comment Richard

    I just updated the post, as there's an article in NYT showing how some insurers are starting to experiment with this data (some from social networks) now.

    I'm open to the dialog, appreciate the time you took to write the comment.

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  • hmmm, i don’t think it makes sense to use social media in order to set insurance policy, because not all teh information can be seen on facebook.

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  • A good portion of these regulations deal with rate setting, and the factors that are used in rate setting. 

  • Thanks for sharing this great info..

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