J.D. Power Study on insurers and data: a matter of trust

As insurance professionals, we’re always talking about harnessing new data streams to improve our products. The benefits are obvious, we tell ourselves – think of the potential to align prices with real risks! But sometimes, we also need to ask ourselves: do our customers actually want us to use these data? Do they like the idea of us scouring their social media footprints to help price their insurance coverage?

A recent J.D. Power survey asks exactly these questions – and found that we have a long way to go before our customers get comfortable with their personal insurance company collecting troves of their data. The survey found that 55 percent of customers don’t trust their insurance company to collect and use “alternate data”. Only 22 percent affirmatively trust their insurer. (Alternate data includes anything from driving behavior to social media; basically, anything that goes beyond what we traditionally consider insurance-relevant data, like age.)

But the issue is somewhat more nuanced than that. Customers are, unsurprisingly, more comfortable sharing data that they already share. Thirty-nine percent are okay with sharing utility, phone, or rent payment information.  And 45 percent are willing to share their driving data with an insurer.

This could actually be good news for insurers. It shows that customers might change their perceptions of trust regarding their insurer as they become more used to sharing the data. J.D. Power notes that “Initially, customers are more comfortable sharing alternative data they are more accustomed to sharing elsewhere. Driving data and its use in telematics or usage-based insurance programs is fairly common knowledge among customers.”

It’s when the data becomes more personal, like social media posts, that customers grow wary. Only 15 percent and 14 percent were willing to share online activity and social media data, respectively. And a sizable chunk (35 percent) isn’t willing to share any alternative data at all.

Additionally, insurance customers are sensitive about what their insurers are using their data for. For example, 65 percent think it’s reasonable for an insurer to use alternative data to help recover stolen vehicles; 63 percent for an insurer to tailor coverage; and 60 percent for more accurate premium pricing. But they become less accommodating when it comes to using data for things like marketing – 55 percent don’t think that’s a reasonable use of their data.

According to J.D. Power, customers are “jaded by the current overwhelming state of marketing, [so] insurers need to underscore the value” of the data their collecting to the customer. That means the responsibility lies with insurers to prove to their customers that the data collection is worth it.

Not surprisingly, even if a customer thinks it’s okay for an insurer to collect their data, the odds are good they’re worried about privacy. Fully 85 percent consider the risks of privacy and security breaches a disadvantage to sharing their data – even if they’re okay with sharing to begin with. And 74 percent think insurers should ask their customers before collecting and using their alternative data.

The upshot is that customer acceptance of alternative data is a gradual process. Customers want to know what data is being collected. They want to know how it’s being used. And if insurers can connect the dots for them – can demonstrate the value that the alternative data is bringing – then their trust and acceptance will grow. As the J.D. Power survey shows, this has already started happening with driving data. How this will play out with other alternative data will largely be up to how well insurers can prove themselves trustworthy data custodians.