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Wall Street Journal Article: Life Insurers to use data from social media

Link to the Wall Street Journal article

WSJ By Leslie Scism Jan. 30, 2019
New York’s top financial regulator is going to allow life insurers to use data from social
media and other nontraditional sources when setting premium rates, though the insurers
will have to prove the information doesn’t unfairly discriminate against certain
customers.
New York is the first state to set specific guidance governing how life insurers use
algorithms to comb through everything from homeownership records to credit scores and
internet use in an effort to size up an applicant’s risk. At least a couple dozen insurers are
employing these automated programs to speed up the buying process, facilitate online
life-insurance issuance and boost stagnant policy sales.
The regulator’s goal, according to New York Financial Services Superintendent Maria T.
Vullo, is to establish ground rules before the use of this information becomes more
widespread.
“Because this is a rapidly evolving area in insurance underwriting, it was important for
the department to create general principles now,” she said in an interview.
Under guidance released earlier this month, life insurers will have to use statistical and
actuarial analysis to determine that any algorithms and data are free of bias against racial
minorities and other groups protected by law. Insurers can’t accept an outside vendor’s
claim that its process is fair, the department said.
The guidance applies to companies operating in New York, but industry consultants said
it could have an impact beyond the state’s borders. New York has one of the largest
insurance departments in the state-regulated industry. Regulators issue new guidance
when they want to clarify how new developments affect existing laws.
WHAT YOU PAY FOR LIFE INSURANCE COULD DEPEND ON YOUR NEXT INSTAGRAM POST
Some life insurers want to monitor how you behave online as a way of assessing your health and
bypassing more traditional blood and urine samples. Here are five online actions that may help you
avoid the medical exam.
• Don’t post photos of yourself smoking on social-media sites.
• Do post photos of yourself running. Riskier sports, like skydiving, could complicate the situation.
• Use fitness-tracking devices that indicate an interest in fitness.
• Purchase food from online meal-preparation services that specialize in healthy choices.
• Visit the gym with a phone linked to a location-tracking service. If you visit the bar, leave your phone at home.
“Everybody will pay attention,” said Tom Scales, a practice leader for life insurance at Celent, an insurance-technology research and advice firm that is part of Marsh & McLennanCo s.
Trade groups said they are studying the directive. Insurers would “continue to explore ways to help more Americans benefit from financial protection,” said Mary Griffin, president of the Life Insurance Council of New York. “Algorithmic underwriting can make it easier and quicker for people to get coverage in place.”
New York’s guidance follows an 18-month investigation in which regulators queried 160 life insurers about their practices. The department’s regulators found a range of data in use: homeownership records, credit information, educational attainment, civil judgments, licensures and other public filings.
Only one insurer out of the 160 said it was using social media, retail purchases or internet activities in underwriting, according to a person familiar with the department’s findings.
The department also learned that some vendors are pitching data to insurers that includes “condition or type of an applicant’s electronic devices” and “how the consumer appears in a photograph,” it said in material posted on its website.
“All have the potential to reflect disguised and illegal race-based underwriting,” the department said of the various categories of nontraditional data. New York insurance laws have long prohibited the use of race in underwriting.
Consultants said the use of social media in underwriting decisions is limited so far. “The data exists and is being collected, but the quality and the integrity of that data is not yet
demonstrated to be accurate enough to be an underwriting input at this time,” said Ari Chester, a partner at McKinsey & Co.
Instead, many insurers are relying on a trove of public information. LexisNexis Risk Solutions said more than 30 insurers are using a model it developed that draws on motor-vehicle records; bankruptcy, criminal and other court documents; professional licenses; college-attendee records, property deeds and tax filings; liens and evictions and other records.
The tool doesn’t use anything from social media, said Elliott Wallace, a LexisNexis Risk Solutions vice president. LexisNexis, he added, is “comfortable with the department scrutinizing and looking at our models.”
Ms. Vullo’s department said information that is directly related to medical conditions—such as prescription-drug databases—is permissible, as are motor-vehicle reports and some criminal matters. Traffic fatalities are a leading cause of death for younger people.
Other regulators are also keeping an eye on developments with life insurers. The National Association of Insurance Commissioners, a standards-setting group for state insurance departments, has a “Big Data Working Group” that is in early stages of focusing on life insurers’ accelerated underwriting efforts, among other issues.
Write to Leslie Scism at leslie.scism@wsj.com

 

NAIFA Webinars - Free to Members!

NAIFA offers some great webinars throughout the year that you'll want to take advantage of with your membership!

Click here to find out more information and to register.

Some of the topics include:

Total HIPAA Compliance

Income Protection – Disability Insurance Encyclopedia

Seven Steps to Retirement Security (Tom Hegna)

The College Funding Conundrum

Tax Reform: The Final Edition - Sponsored by Ameritas

How to Hold Your Focus All Year Long with One Page Business Plans

New Practice Best Practices

Insure Your Love with Life Happens

Easing Racial Tensions in the Work Place – Sponsored by NAAIA, NAIFA and New York Life

Tax Planning Opportunities for 2018

Seek First to Understand Financial Services and the LGBT Community

Reaching and Engaging the Hispanic Community

Approaching the Modern Consumer in Insurance – Sponsored by Everquote

 

Dan and Josh Reagan

Check out the featured Legacy Story of our own Dan and Josh Reagan on the NAIFA National website:

Dan and Josh Reagan

 

Message from the President

May 2, 2018
Fellow advisors and members of NAIFA Vermont:
Welcome to our NAIFA Vermont State Conference for 2018. We are excited for the day, having worked hard to pull together a group of speakers that we believe will offer information and ideas that you will find both practical and inspirational. It has been a team effort to pull together this event. I want to thank the NAIFA Vermont Board for their encouragement and support, our presenters and sponsors for their participation, and the Double Tree by Hilton for their space and services. The collaborative effort of all is important to the success of our conference. Looking forward, I feel honored to assume the helm as your incoming President for NAIFA Vermont. NAIFA is a tremendous organization offering significant resources and benefits to it’s membership. From educational resources such as the LUTCF training program to advocacy with our legislators both at the state and national level, NAIFA supports each of us both individually and collectively. Look around you. Our membership is rich with professional experience, collaborative opportunities, and friendships.

I am excited for the year ahead but note that we are facing some significant challenges. From declining membership and participation locally, to potential legislative changes impacting our industry on a broader scale, we have some work to do. I say WE because no one person or board can do this alone. I firmly believe that we are better together. I’m better because of NAIFA. NAIFA is better because of you. I invite you to join our collaborative effort for positive growth in the coming year.

Sincerely,

 

C. Tyler Wood
Financial Representative
President, NAIFA Vermont