John Hancock has built its life insurance strategy around Vitality, after announcing a few years ago that all new business would use its blend of data, behavioural science and incentives to “inspire healthy changes in individuals”. And Allstate’s Drivewise is a telematics based safe driving programme.
At the moment, the only way for that Drivewise policyholder to earn those Vitality points is to submit proof of safe driving with a Drivewise cash back reward email or a recent bill from Allstate showing the safe driving discount. Rather clunky and analogue in my opinion, but I suspect not for long.
What does this point to then? I suspect this collaboration will soon evolve, into a more digital format to begin with, and then in a more real time direction after that. All it takes will be for the two insurers’ systems to start talking to each other and who knows, we could be heading towards real time life underwriting as you drive. Let's not forget that there's also the potential here for Allstate to incorporate health data into the underwriting of its motor portfolio.
Several years ago, the CEO of a leading US insurer foresaw just that. In their opinion, someone driving in a stressed out manner should have their life cover adjusted to reflect the higher life and health risk. That’s one reason why I said earlier that this John Hancock/Allstate collaboration “confirms a trend”.
More than Just How You Drive
Yet there’s more to this trend than just how you drive. Telematics based motor insurance has the capacity to tell an insurer not just how you’re driving, but also where you’re driving. From that can be deduced what you’re doing, and who with. Visits to gyms, bars and pharmacies would allow the insurer to use its predictive analytics to see emerging “risk patterns”. And then adjust its underwriting accordingly.
I put “risk patterns” in quotation marks, for they will be risk patterns, not your behaviours. The two are different. One is based on correlations, the other on causations. One is a proxy, the other is you (more here). This raises ethical questions around issues like privacy, autonomy and identity.
So the John Hopkins / Allstate collaboration could well be a precursor to a much more inter-woven approach to underwriting. The question is – are consumers prepared for this? Will they find all of this inter-weaving of underwriting fair and reasonable? For example…
- if the telematics shows that you have a tendency to fill up the car with petrol when the tank warning light comes on, will this be seen as evidence of a risky character and so increase your life and health premiums?
- if a lot of your driving is at rush hour, will this increase both your life and motor premiums?
- if you started parking at or near to a hospital, will your life and health premiums go up, or cover reduced?
Remember that with granular personalisation, the logic that you shouldn't pay for the risky behaviour of others means that ultimately, you will pay for your own.
There are Vitality programmes here in the UK, providing motor, life and health covers. What the insurers involved should start considering is the extent to which their Vitality programme will go down that ‘ultimate’ path outlined above. Does granular personalisation fit with your firm's purpose? Does it reflect the type of relationship you have / want with your customers?
Watch Out For This
In Issue 2 of the Ethics and Insurance Newsletter (out on 24th Feb.), I’ll be exploring the understandability of insurance premium rating, drawing on recent research in the US.
To read a free round up of news like this, join the mailing list of the Ethics and Insurance Newsletter. It comes out every fortnight.