Can the insurance sector get consumers on board with data gathering?

Over the last few years, many businesses have been tempted by the idea of using big data to gain a much more detailed picture of their customers, which they can in turn use to provide more personalised offers and even discounts.

But the catch with this is that in many cases, consumers will be wary of technology solutions that delve deep into their personal information. In some situations, they will need to give their express permission for a company to collect and use their data – and this can prove tricky to obtain, despite the benefits on offer.

This is a problem currently being experienced by the car insurance sector. It was noted by the Wall Street Journal that the advent of big data analytics, combined with Internet of Things technology, has provided great opportunities for the sector. 

Whereas in the past, insurers had to rely on broad categories such as age, occupation and car type to determine risk levels, by using sensors in their customers' vehicles, they can track behaviour much more accurately to deliver personalised quotes. 

For instance, among the metrics tracked by US insurer Allstate is hard braking – defined by the company as a speed reduction of more than eight miles per hour in less than one second. Analysis of this data reveals that drivers who do this more than eight times for every 500 miles driven are 73 per cent more likely to be involved in an accident in any given year.

However, despite the impact this may have on premiums – with large discounts on offer for the safest drivers – consumer trust in the technology remains low.

According to US insurer Progressive, almost 80 per cent of its customers would qualify for a discount through the use of driver trackers and big data analytics, with savings of up to 30 per cent available.

But just a quarter of the company's new customers use the technology, while a survey by the company found around 40 per cent of people stated they would never consent to the use of such sensors.

Chief executive of Progressive Glenn Renwick noted this is a challenge that's particularly prevalent in his industry. "Insurance is not something where people say, 'I trust you,'" he said.

Therefore, companies in the sector are having to create even more incentives in order to persuade people to use the technology. Allstate, for example, offers drivers the chance to earn points through safe-driving challenges, such as driving below 80 miles an hour and avoiding hard braking for three straight days, which can be redeemed for  deals on merchandise, gift cards and local offers.

In years to come however, some experts are predicting that resistance to the use of data-gathering for use in analytics-based businesses will fade. Paul Saffo, a Stanford University professor and specialist in technological change, told the Journal that  usage-based pricing will be inevitable for the insurance sector in the long term.

He added that in the US at least, consumers have already shown increasing willingness in recent decades to sacrifice privacy for convenience, and they will continue to do so – even as they complain about the technology.

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