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Siren's E-song: personal information about applicants from social media sites raises concerns in the underwriting process.

In Greek mythology, sirens were nymphs that sang sailors to their destruction.

A similarly beguiling version could be airing at an insurance company near you.

The 21st century rendition will be carefully crafted to play upon senior management's concern for controlling costs. The less the audience understands real-world risk management, the more enticing the saccharin message will be.

There are those who would like you to believe that so-called "predictive analytics" should be deployed to scavenge personal purchase histories as well as content from social media sites.

"Facts" gleaned therefrom would be used to select risks, either independent of, or in tandem with, prevailing practices.

Considering the vast reservoir of nebulous inferences one might suck from cyberspace, why would any carrier continue squandering precious funds on objective information?

A few years ago, this underwriter had the opportunity to tangle verbally in an industry venue with an advocate of divining risk from credit card purchase histories. It soon became apparent to all present that this proposition unravels faster than the proverbial ball of yarn:

* If an alleged nonsmoker buys a carton of cigarettes, surely he suffers from a nicotine narcosis, even if they are for his live-in mother-in-law.

* When a teetotaling general contractor procures a case of top-shelf bourbon in December, clearly

he must be a (closet?) drunk ... forget the fact that these costly fifths are seasonal gifts for clients.

* Allocate disposable dollars for exercise equipment and you are a preferred risk. Spend the equivalent on books and you betray your insidiously sedentary nature.

Certainly this novel stratagem will endear us to our customers. Not to mention how it will play out with producers.

Similar concerns loom with pillaging social media sites.

To buy this notion, must one cleave to the fabulist idea that everything people post on personal pages is awash in verisimilitude?

Once the word is out--"the word" always gets out--about our rank naivete, a dark night of rampant antiselection will descend upon us.

Because it won't take long to figure out which fanciful nuggets of site content expand one's industry product access to more than just annuities.

What if, by feasting upon purchase records and site postings, we rouse the ire of regulators and legislators?

Could their pushback trigger a snowball effect, which ultimately puts legitimate underwriting practices at grave risk?

In a recent survey, more than 30 chief underwriters were queried on this matter.

These are some of the comments:

"I personally feel that sociometric underwriting is unethically distasteful..."

"You cannot be certain of the correlation between what I purchase and what I do." "My concern is this would expose us to even more regulation."

Their observations are shared in hopes we can drown out this siren song.

Their names are withheld out of respect for their candor.

Listen to an interview with Hank George at www.bestreview.com/ audio. Digital readers: Hold cursor over icon for content.

Hank George, a Best's Review columnist, is the principal in his own consulting and training firm, Hank George Inc. He may be reached at HankGeorge@aol.com.
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Title Annotation:Life: Underwriting Insight
Author:George, Hank
Publication:Best's Review
Date:May 1, 2011
Words:509
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