Why insurance is catching up to the value of social media data
Long before “fake news” entered everyday speech, social media presented an opportunity for anyone to become a newscaster of sorts. While many websites such as Facebook, Twitter, LinkedIn, and YouTube have sharing guidelines, they generally enable individuals to broadcast and curate virtually any information they choose—with intended and sometimes unintended audiences.
Many insurance companies are making intermittent use of this information, typically for the purpose of marketing as well as to crack down on fraudulent claims. However, as the estimated percentage of American adults using social media has jumped from 51 percent in 2011 to more than 70 percent in 2016, insurance industry use cases have shown few signs of evolving as rapidly. That is, until recently.
The grounds for these predictions include a trend towards “private conversations” on social media, which can limit insurer access to data for analytics, including low-quality data, (for example, “fake news”). At roughly the same time, there was a flurry of activity around social media data among property/casualty (P/C) insurers.
One British automobile insurer reportedly planned to offer applicants an opportunity to share social media data and earn potential discounts up to approximately $400 when “safe” personality traits were detected. Meanwhile, a reinsurer reportedly invested in a startup that allows users to aggregate social media to “achieve personal insight that is impossible to get when data is scattered across the web.”
Did insurers arrive late to the dance, or are reports of the demise of social media analytics premature?
The relative dearth of activity in P/C insurance until recently may be less reflective of the value of social media data, and more about challenges in analyzing that data and putting it to constructive uses. The auto insurance program noted above was reportedly pulled before its official launch after a social media company limited access to its application programming interface (API).
In addition to uncertainty about data, social analytics may involve other considerations, including retrieval of large volumes of unstructured data from the web, separation of truth from sarcasm or hyperbole, and association of individual and business “web handles” to the entity insured.
Given the sometimes intimate details people send over social media, insurers will need to exhibit exceptional data stewardship and appreciable policyholder benefit in their ventures.
Plenty of evidence suggests the above challenges are worth solving. A 2016 study of the hashtag “whiledriving” revealed numerous instances of policyholders snapping pictures of surroundings and selfies from behind the wheel and posting to social media. Some insurers have reportedly used geo-coded social media posts as a source of real-time data to assess local risk conditions post-catastrophe.
When combined with incentives for sharing, social media data can be analyzed in a way to foster life-saving decisions by insurers and policyholders.
Tapping hidden markets
In this vein, social media data may present a key for insurers to unlock underserved markets. For example, surveys suggest millennials are the most likely age group to rent homes, but the least likely to purchase renters insurance. For context, consider that more than one-third of individuals in this age group are estimated to be “credit invisible” or “unscored”.
The trend toward invisibility suggests a separation from traditional financial products. Some insurers have begun to address these novelties with convenient app-driven experiences and social giving initiatives, and report significant traction among first-time insurance buyers in the millennial generation.
Lenders are reportedly considering social media data such as an individual’s number of friends and frequency of interactions to replace traditional credit histories and help bring loans to the “unbanked.” Could insurance become the next financial resiliency tool brought online by social media?
It remains unclear whether the demise of social media analytics is fake news—or if fake news and other factors are driving a recession in social media analytics.
What’s clearer is that more and more people are sharing and interacting online every day. Insurers that are blind to these realities may fail to connect with their policyholders’ evolving lifestyles.