Save on insurance, compromise on privacy

Incentive-based insurance began in the late 1960s when smoker/nonsmoker policy differentiation first took shape in underwriting life, health and disability policies. From there, insurance companies started to differentiate not just standard ratings but preferred, super-preferred and ultra-preferred. Ultra-preferred being, in theory, a status that could only be attained if both your parents are alive and healthy, you have never smoked, you have low body mass and fairly strict ratios of weight and height, and fairly low blood pressure and cholesterol, among other criteria. In effect, that transformed "standard" to substandard and made ultra-preferred and super-preferred the new norm for what was standard and standard-plus.

While I see more of this occurring in the life and disability types of insurance, I do not foresee any time in the near future that consumers would favor DNA or other objective testing-based criteria in employer-provided health insurance as well as for those receiving Medicare.

The recent health care law is offering states $100 million to reward Medicaid recipients who make an effort to quit smoking or maintain healthy weight, blood pressure or cholesterol levels. We may start to see exercise and wellness apps that demonstrate commitment to healthy living. Additionally, it may become possible to monitor healthy lifestyles via social media, such as Facebook pages. How likely is it that standard evaluations for life insurance policies, e.g. medical and blood tests, will include blanket requests such as: "May we use available data in your assessment?"

Again, I don't see DNA being accepted anytime soon. And with the recent backlash on information that social media sites are gathering without the user's express permission, I don't think this is going to be accepted in the next 20 years.

What types of technology do you believe people would be willing to adopt on a daily basis to save money on insurance?

I think that the auto insurance industry's black box is one of the first attempts of that approach. I think safe drivers will likely accept it and less-safe drivers will not. Again, this differentiates standard and better-than-standard so that people in the middle -- who are neutral in the making of rates -- are going to wind up paying more than they would have before such a rating system was adopted. And the black box is a good analogy in jumping from auto to life, health, disability and long-term care insurance. The essential issue is what that black box will reveal, and how will the new information be used? It has to be something different than what is currently in your medical records because those records are already part of the underwriting process. Now we are saying that additional information -- such as anything a DNA test would reveal -- would enter the underwriting process. I think that there is enough media concern, accentuated by movies and books on this very topic, that will postpone, for a long time, that type of data being used for any underwriting.

Special thanks to professor Richard Weber for sharing his insights. The questions for this interview were inspired from an article published by the futurist Jim Carroll, "Insurance 2020: Bold moves, turning concepts upside down!"


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