Telematics looks set to transform motor insurance over the next 5 to 10 years, just as personal health monitoring devices will do likewise for health insurance. Both will be a clear step for the insurance market towards the world of ‘big data’. Not just lots of data, but lots of highly sensitive data. How this wealth of data is handled raises all sorts of ethical questions.
Telematics involves the fitting of a black box device to a vehicle, so that it feeds real-time data to your insurance provider about where, when and how the vehicle is being driven. This data will then be used to calculate the premium. It’s a sophisticated form of ‘pay as you drive’ insurance. Indeed so sophisticated that its advocates claim to be able to detect which person is driving the vehicle, based upon individual patterns of cornering, turning and braking. In five year’s time, most motor policies are expected to be underwritten using telematics.
Personal health monitoring devices work in a similar way, providing your insurer with regular data about how you’re looking after yourself, using a range of health indicators. That mad dash in the car to the fish and chip shop could have widespread insurance implications.
Both technologies will bring the insurer into a much closer relationship with their policyholder. To avoid that closer relationship becoming too uncomfortable and intrusive for the policyholder, the insurers and telematics providers need to recognise and actively address the confidentiality issues associated with big data.
While there has been talk of common standards, the debate has largely been about technical and competition issues. It’s being held amongst insurers and device providers, seemingly without input from those with more of a public interest perspective. Several insurers are starting to recognise some of the issues raised by such devices, but their conflicts of interest hardly make them reliable advocates for a balanced solution.
The number of telematic devices in use is relatively small and a window still exists for a wider debate to take place before exponential growth kicks in. It will need to cover points such as the following:
- Who owns the data collected through telematics technology?
- If it is the customer, how can they put that ownership into practical effect at key points in their policy’s lifecycle? An obvious example is when seeking alternative quotations at renewal.
- If it is not the customer, then who does own it and what rights does the customer have in relation to collection, interpretation, use, access, transferability, sale and retention.
- Should there be limits on the extent to which telematics data can be interpreted and the uses to what that interpretation is then put?
- How would such limits be monitored and controlled?
- What form of consent should the insurer using telematics data have to obtain from the customer and how upfront and transparent should the insurer be about the uses to which they will put the data being collected?
- Should there be one form of consent or tiered consents offering different forms of value to the customer?
- What information security standards should insurers using telematics be required to meet?
- How does the insurance sector work to a common standard in relation to the above questions and how does the customer have a say in the setting of such a standard?
These are not ‘nice to know’ points, but ones that need to be recognised and addressed quickly in order for the insurance sector to undergo this seismic shift in underwriting practices without coming massively unstuck.