Analytics to predict longevity

Posted by admin updated on 23 Jul, 2011

Life insurance companies have found a new use for the vast dossiers of data: predicting people’s longevity. Insurers have long used blood and urine tests to assess people’s health. In a remarkable use of consumer marketing data, insurers are now exploring whether online shopping details, magazine subscriptions, leisure activities and social-networking information can reveal nearly as much about a person as a lab analysis of their bodily fluids.

In one of the biggest tests, the U.S. arm of British insurer Aviva PLC looked at 60,000 recent insurance applicants. “Requiring every customer to provide additional, and often unnecessary, information” such as blood or urine samples, “simply makes the process less efficient and less customer-friendly,” says John Currier, chief actuary for Aviva USA. They showcased, before the Society of Actuaries, two hypothetical 40-year old insurance customers “Sarah” and “Beth”.

Sarah reads design and travel magazines, has a short commute, runs, bikes, plays tennis and does aerobics. She eats healthy food, watches little TV and travels abroad. She is an “urban single” with a premium bank card and “good financial indicators”. Beth, on the other hand, has a 45-mile commute, is divorced with no kids, frequently buys fast food, walks for exercise, buys diet and weight loss products, and is an avid TV watcher.

Sarah falls into a “healthier risk category”, while Beth is a candidate for worse-than-average predicted mortality. Based on that, the insurance company would proactively make efforts to retain Sarah with a preferred policy. On the other hand, they would recommend not sending Beth offers or using more aggressive retention methods.

Making the approach feasible is a trove of new information being assembled by giant data-collection firms like Acxiom, Experian, Infogroup, etc. Some retailers share information about purchases made by people, including item description, price and the person’s name. Increasingly, information comes from people’s online behavior. Acxiom says it buys data from online publishers about what kinds of articles a subscriber reads—financial or sports, for example—and can find out if somebody’s a gourmet-food lover from their online purchases. Online marketers often tap data sources like these to target ads at Web users. These companies then sort details of online and offline purchases to help categorize people as runners or hikers, dieters or couch potatoes. They also scoop up public records such as hunting permits, boat registrations and property transfers. They run surveys designed to coax people to describe their lifestyles and health conditions.

Data mining has long been used for targeted advertising, but if this method was implemented for insurance, it’s questionable whether it would be subject to the Fair Debt Collection Practices Act. Other insurers exploring similar technology include American International Group Inc. and Prudential Financial Inc.

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