IDEA EXCHANGE
Technology Underwriters May Soon Be Using Social Network Data By Young Ha
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he insurance industry is paying increasing attention to what people and businesses post on social networking sites like Facebook, Twitter and LinkedIn. Already, scouring the social network pages of insureds is a common practice on the claims side of the business. Some investigators say it’s one of the first things they do when looking into fraudulent claims. Currently, social network data are being used as evidence in courts of law in claims cases. Individual underwriters are retrieving risk evaluation information on their insureds through searches on social sites. But in a few years, automatically mined data from social networking sites could find their way into the underwriting pricing process. This data could become a factor in determining premiums for both personal and business insurance, according to a new report from Bostonbased research firm Celent, titled “Using Social Data in Claims and Underwriting.” Insurers are now using social media for sales and advertising, Michael Fitzgerald, Celent senior analyst and co-author of the report, told Insurance Journal. “Some are using it in claims. Underwriting is next.” Regulators have not yet offered guidelines on the use of social data, Fitzgerald added. But that could soon change. “Just as insurers recognize a link between credit health and risk in auto insurance, social data may offer similar insights for insurers who set out to crack the data,” the report says.
As users purchase items online, and communicate with others in public forums, they leave behind data about their preferences, lifestyle, operations and habits, according to the Celent report. This data can be used to develop
writing and claims processes” and ‘private’ claimant/insured’s combecome standard inputs into risk ments indirectly, detailing events evaluation and settlements. they attend, groups they’re associCelent contends that social ated with, etc.” data has the potential to join While bypassing certain existing third party data sources privacy settings is technically such as CLUE (Comprehensive possible, it also raises a differLoss Underwriting Exchange), ent question: what is ethically motor vehicle reports, and MIB or legally allowed when mining fraud reports to enable more social networking sites, and to accurate underwriting evaluawhat extent should they be used tion/pricing and to help lower for insurance? claims costs. Celent suggests one way to Pew Research Center shows deal with this issue is engaging that the young are still the with customers, seeking permisdominant users (77 percent of sion to use their social data, and U.S. Internet users in the 18-29 then automatically gathering it. age group use social networks). Depending on regulatory rules, But those in the older age group insurers could offer customers of 30 to 49 are also using social discounts as an incentive. a risk profile for an individual or sites in big numbers (55 percent for a company. of Internet users in this group Challenges That Lie Ahead On the corporate side, companow use social networks). In the There are plenty of hurdles. nies postings also include descrip- 50-plus age group, 23 percent of Companies need to develop tions of new product offerings Internet users utilize social sites more sophisticated authentica(hence new added risks), services and the numbers are increasing. tion methods, (Is that the same and operations. This expansion into additional John Smith who may be filing a Also useful is the “social age groups is meaningful, the fraudulent workers’ comp claim?) graph,” which shows how indiCelent report says, since people improved data extraction tools, viduals or companies are linked in older groups are the target and more advanced analysis together: a picture of who is market for many lines of business techniques. The challenge for friends with whom, and what including high underwriting friends of friends people have. net worth Regulators have no organizations These graphs can give insurers personal lines, guidelines on overall is to develop insight into how an individual life and annuimethods and use of social data. may perform as a risk, based on ties, and small procedures for the behavior of those he or she is commercial. collecting, sifting, analyzing, and connected to. The report says claims profesincorporating social data informaSuch data can be integrated sionals have been learning how to tion into their existing system into an insurer’s existing process link relationships on social sites environments, the report says. and automation environment to gain information on profiles According to Celent, there are and compared to previous risk which use the highest privacy untapped analysis opportunities information to identify material settings. Investigators report that in tapping into recent advances in changes that should be addressed “People always have friends of actuarial science, predictive modfrom in underwriting. friends willing to ‘accept’ a new eling, and tools to analyze social Celent predicts that over the ‘friend,’ and that friend’s privacy data and to discover and leverage next three years, social data will settings aren’t always set, allow“hidden relationships in social be “incorporated into core under- ing us to access pictures and the data.”
46 | INSURANCE JOURNAL-WEST REGION November 7, 2011
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