Inside Deloitte’s New Life Insurance Consumer Assessment Technology and Predictive Modeling Software

The use of sensitive personal information by insurance companies to execute underwriting decisions is expanding to include consumer marketing data. An investigation by The Wall Street Journal revealed a remarkable proliferation of the use of consumer-marketing data to create a “predictive modeling” system for insurance applicants.

With an inside view of Deloitte Consulting LLP’s new consumer assessment technology for life insurance companies, the Wall Street Journal reports that Deloitte designed predictive modeling software that uses data such as personal and family medical histories, as detailed on written insurance application forms, to categorize people into various risk categories.

Deloitte’s software also has access to industry-shared information from past insurance applications and motor-vehicle reports. Furthermore, the Deloitte software also uses consumer-level marketing data from Equifax Inc.’s marketing-services unit, since acquired by Alliance Data Systems Corp. The consumer files contained hundreds of data points on each person catalogued, including attributes applied to each individual, such as hobbies, TV-viewing habits, and income estimates. In Deloitte’s final predictive model, the nontraditional consumer-marketing data represented about 37% of the predictive ability, it says.

Life insurance provider Aviva and Deloitte judged the test largely successful. “The use of third-party data was persuasive across the board in all cases,” said John Currier, chief actuary for Aviva USA. (more…)

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Insurance Companies are Mining Online Data To Predict Medical Health and Lifespan

Life insurers are testing new ways to predict life expectancy and are mining personal data online and offline to analyze the health and medical conditions of consumers. According to an investigation by the Wall Street Journal, executives at American International Group Inc., Aviva USA, and Prudential Financial Inc., confirm they are exploring the use of consumer-marketing data to create a “predictive modeling” system for insurance applicants.

Making the approach feasible is a trove of new information held by giant U.S. data-collection firms, such as Acxiom, Alliance Data Systems Corp., Experian PLC, and Infogroup, who each have detailed information on more than 100 million American households. Deloitte Consulting LLP, a major backer of the concept, has pitched it in recent months to numerous insurers.

These data-gathering companies have such extensive files on most U.S. consumers – online shopping details, catalog purchases, magazine subscriptions, leisure activities and information from social-networking sites – that some insurers are exploring whether data can reveal nearly as much about a person as a lab analysis of their bodily fluids.

This data increasingly is gathered online, often with consumers only vaguely aware that separate bits of information about them are being collected and collated in ways that can be surprisingly revealing. In this Wall Street Journal NewsHub video interview, reporter Leslie Scism explains how “Insurers Test Data Profiles to Identify Risk Clients”.

Although the personal information sold by marketing-database firms is lightly regulated, utilizing it in the life insurance application process would “raise questions” about whether the data would be subject to the federal Fair Credit Reporting Act, says Rebecca Kuehn of the Federal Trade Commission’s division of privacy and identity protection.

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