Data ownership has always been a hot topic with insurers, distributors, data providers, and policy holders claiming right to some or all of the data. The volume of the discussion of this has risen with the increase in importance of data to the profitability of the business. An alternative is emerging which sounds a bit zen-like: “Because everyone owns it, it belongs truly to no one.” We’d like to know what you think.
Why does data matter more now than ever …
At a recent meeting, the Insurance 2023 working group was discussing the impact of more and better data on the insurance industry over the next decade. One of the group members suggested that insurers are realizing that they are as much in the information business as they are in the risk taking business, because more/better data is correlating with more/better results. So insurers will likely focus more on access to data and automated processes to improve data analysis and use.
But automated data management is not sufficient. Other group members suggested that personal relationships are critical to the business. This has classically been the purview of distributors. Direct marketers are understanding the importance of face to face availability. For example, Canadian banks, who likely have some of the best data gathering, analytic, and call centre tools are investing in re-opening local branches with extended hours. The primary purpose of this is to reestablish personal relationships with customers.
We have noted elsewhere that the social media, whose business is to monetize behavioural and operational data, have expressed interest in insurance and have become major competitors in the insurance quote aggregation business in the UK.
The bottom line: Data and its usage are more important than ever.
So who owns these assets ….
It is fair to say that everyone in the value chain – insurers, distributors, third party information providers, aggregators, and others – have interest in different data segments. However, ownership (and control and governance) are different matters.
Insureds, independently and through groups such as consumer associations, have strong opinions about the amount of private data that can be stored and used. Governments have agreed, and enacted legislation, such as PIPEDA to control how electronic information is stored and used.
Do we need King Solomon or the Zen Master to decide how to share the data?
The health industry (including health insurance) has been on the leading edge of privacy and data usage. In a recent article, Health Business Daily editor, Jane Anderson wrote that data ownership is a critical question for accountable care organizations (groups of health care providers who agree to meet standards of accountability to Medicare in the US).
Anderson cites a discussion she had with Erik Johnson, senior vice president at Avalere Health LLC. After reviewing the options for satisfying the numerous, conflicting requirements of groups such as health care providers, administrators, third party service organizations, patients, and the government with Johnson, Anderson writes:
There’s an emerging concept of a public trust for health information, in which ACOs and other health entities would merge all their data under the umbrella of an independent, potentially nonprofit group that would store it and make it available to all. That model may offer the best way to thread the needle between the various interests of the different stakeholders, Johnson says.
This seems to have merit in allowing access to a trusted source based on need. It also allows for a single source of the truth. However, it also seems to fly in the face of organizations viewing data as proprietary.
So we’d like your thoughts. Was data born free, forever seeking to return to that state, or does ownership convey privilege that will be maintained at all cost?
The “ownership” of data is a charged topic as data is the foundation of intelligence and the ability to make informed decisions regarding potential risks, returns and rates – all basics of the insurance industry.
Data is also a resource that has monetary value, so there needs to be a structure on who owns the data, who can use the data and how to buy, sell, trade, or authorize use of, the data.
1.)The laws and conventions surrounding data are still emerging.
As data collection and management is a rapidly emerging field, it’s fair to say that the laws are still evolving and uncertainty exists. This is one reason one might think that “Because everyone owns it, it belongs truly to no one”. At the same time, this is also a potentially a dangerous assumption, because data has value, and competing interests are emerging, to capitalize on its worth.
Perhaps a safer assumption to make, would be that the laws related to data and data management, are only starting to emerge. We are entering the era of “Big data” and the rules related to this are only starting to be debated and codified.
2. Where are the laws and conventions headed?
To see where the laws and conventions around data might go, it’s useful to consider a parallel field and examine the laws and commercial conventions have developed around that field. One such parallel could be photography, where a photographer can take, buy, sell, trade and authorize use of most photographs without a problem. No one has an issue if a photographer takes a shot of Niagara Falls and tries to sell this. But if the photograph contains the image of a person, the game changes dramatically, because it opens up the issue of rights to this image. In the case of photographs of people, the photographer might “own” the photograph but if/when he or she tries to use it, potential problems of rights, usage, and privacy emerge.
3. The Data belongs to the driver.
Data is similar to photography, because in that it’s an image or trail of a person. It’s not a large step to take to see that both the image (in the case of photography) and the image (in the case of data) belong to the individual and that he or she can buy, sell, trade or authorize use of this image.
The photographer can make money from the data as can say an advertiser who pays for this image. But this can happen only after settling the rights and usually paying the person in the image.
4. US UBI programs are based on the assumption that the driver owns the data.
While some insurance companies, telematics service provides (TSP’s), and actuarial consultants may see that it is a problem for the driver to own the data, this seems to be the implicit assumption behind all the Pay as you go (PAYG) and Usage based insurance (UBI) programs in the United States. The insurance carrier asks the driver to install the device in exchange for the chance to provide him/her with a lower rate. This lower rate is essentially a payment for permission to collect and interpret the data.
5. Advantages in the driver owning the data.
There are a number of key advantages in disclosing that the driver owns the data. As a TSP, our company IMS (www.intellimec.com) sees a tremendous advantage to returning the data to the driver in more usable forms, including portals, alerts, scoring and coaching tips. Some of the advantages include:
a.)Provides understanding of rates
One of the models we recommend to our UBI clients is to provide their policyholders with a method for ranking them against their peer groups or the overall driving population. This allows them to see where they rank and why they are charged the rates they are required to pay to insure their vehicles. We recommend this because a very large proportion of drivers think they are “above average”. Some studies show that over 90% feel they are above average. With thinking like this it’s no wonder drivers don’t like the rates they are charged.
b.) Changes the nature of the insurance carrier – policyholder relationship.
By providing on-going driver feedback, the auto insurance company should be able to change the conversation from being about rates and claims to being about how the insurance company can be a true service provider to the policyholder. In turn, this will increase loyalty, which is critical to the long term prosperity of the insurance carrier.
This thinking ties in with your comments about the importance of relationships and the parallels with the banking business in Canada. Auto insurance companies have a chance with telematics, to provide real value to drivers. It would be a huge lost opportunity if it kept the data to itself.
c.) Reduced advertising costs.
The question then arises as how to finance a UBI program? Well first off an insurance carrier should be able to reduce the amount of money spent on retention because sharing the data becomes a retention strategy in itself. Arguably this could mean less advertising.
d.) Better book of business.
If the theory of adverse selection works in practice, UBI should result in a better book of business the early adopters of UBI will increase because claims will decrease -again based on the implicit thinking that the driver owns the data.
6. Central repository of data.
Finally I’d to say something about the central repository of data referred to in the discussion about Jane Anderson. I personally think this is very interesting and can see many potential public and private uses for this data. This is one of the reasons we negotiate with our clients and their policyholders to have some rights to their data while respecting its rightful owners.
We too think the more and better data will result in a better industry. To get there we will need to aggregate data…..and we will need to provide some rating on data quality. But that’s probably best left to another blog itself.