Very personal finance
Marketing information offers insurers another way to analyse risk
A SWISS life-settlements firm called Rigi Capital Partners (RCP) recently considered buying the life-insurance policy of an elderly woman apparently suffering from dementia. RCP would take over payment of the policy premiums and receive the full death benefit when she passed away. Her medical records revealed that she had forgotten even her son’s birthday. But Robin Willi, RCP’s owner, searched Facebook to find out more about her. Her profile suggested she had a vibrant social life, not dementia. Reckoning that she was much healthier than she wanted to appear, Mr Willi did not offer to buy her policy.
Medical records can be deceptive, incomplete or expensive to analyse. Mr Willi thinks that publicly available data will be increasingly useful in helping insurers distinguish the aerobics enthusiasts from the couch potatoes. His firm is small enough to be able to search for data manually. For bigger insurers, software is now being developed by technology firms such as Allfinanz and TCP LifeSystems to sift through all the marketing data that might help them identify tomorrow’s cancer patients or accident victims.
Such information can be bought from marketing firms that aggregate data about individuals from records of things like prescription-drug and other retail sales, product warranties, consumer surveys, magazine subscriptions and, in some cases, credit-card spending. At least two big American life insurers already waive medical exams for some prospective customers partly because marketing data suggest that they have healthy lifestyles, says Tim Hill of Milliman, a consultancy that advises insurers on data-mining software systems.
The software picks up clues that are unavailable in medical records. Recklessness in one part of someone’s life is a pretty good signal of risk appetite in others, for example. A prospective policyholder with numerous speeding tickets is more likely than a safer driver to end up with a sports injury. The software also detects obscure correlations. People who frequent ATMs so they can make cash payments tend to live longer than those who prefer writing cheques or paying with credit cards, it turns out. People with long commutes tend to die younger. Why this should be is not clear: some speculate that ATM users tend to be more spontaneous types, who like to have cash in their pocket and whose lifestyle may be more active; others hypothesise that sedentary commutes mean less time to do something healthy in the evening.
The technology is not perfect. For some predictions it cannot beat a blood test. But manual underwriting with medical tests can cost hundreds of dollars and, according to one estimate, drags on for an average of 42 days in America and Europe. That gives potential customers ample time to talk to a competitor or walk away. Automated underwriting can cost a tenth as much and be done once a human reviews the software’s recommendation.
Insurers’ interest in data mining will only grow, says Kevin Pledge, the boss of Insight Decision Solutions, an underwriting-technology consultancy based near Toronto. He has investors interested in a project to develop software to comb Facebook and Twitter for promising sales leads: a woman proud of her pregnancy might want to buy life insurance, for example. Insurance firms will also analyse grocery purchases for clues about policyholders, he predicts. But that raises some sticky questions about privacy. Mr Pledge himself has begun to forgo his supermarket loyalty-card discount on junk food and pay for his burgers in cash. Promising as data mining is, much will depend on how regulators, and consumers, react.
Paying for prescription drugs is already datamined to death if you pay by personal check. Everything from you name, address, bank, what you bought, how often you buy it, and for it likely is for, is all recorded and the data distributed by third party.
Consumer surveys and warranty product cards? Guess what, most of that I don't figure they need to know so I don't fill them in. Nothing says you got to fill that out or the company won't honor it's product. You're just supplying their other money chain and I for one resent the datamining. Customer loyalty cards? Screw you, the privacy you are giving up isn't worth the few cents you will get cut off the price. I always laugh at them when they ask for such a card and no thanks, I have no intention of ever using one.
I've learned one little thing in this life that has stood me in good stead. When and where you can, pay for it in cash. There's no interest charge for paying in cash, there's no merchant fees, no credit card fees, and dang little spying on what you are buying.
Now some of these banks and chain stores have gotten a racket going on bounced checks. You'd be amazed at just how fast they can raise the price on one of them. For instance, the bank may charge you $30 on a bounced check. That money will come out before other checks are taken out of your account's balance, even if you made a deposit that day. The deposit may wait a day or two, just so the bounced check charge will be taken out.
The chain store has another racket. How this one goes is they run the check through a electronic teller check. If it says it is good, they take it. But another third party actually guarantees the chain store the money, whether the check is good or not. The third party has an angle. If the check bounces, they then start this electronic resend of the check. As often as possible, they will electronically resend the check and it will show up for cashing at your bank. Everytime the bank refuses to honor it, that's another $30. You can call them and try to pay them but they will claim they don't have it, it's in transit to the bank and delay accepting payment. By the time you actually get them to take the money, your check is now running several hundred bucks over what it was when you wrote it. Now I'm not trying to say writing bad checks is ok, it isn't. It's a really bad idea. When it happens, you are fixing to pay out the nose. All that gets eliminated with cash.
Cash winds up always being cheaper in many ways. I don't want an ATM card, a credit card, nor a debt card. I'll pay cash, thank you.
Very personal finance
Linear Mode
