RM Vishakha, MD & CEO, IndiaFirst Life Insurance said that as insurers, they would want to use social media data. “We are toying with the reinsurers that if an individual gives us their social profile, can we give them better pricing. If you get that data, you underwrite better rather than staying static,” she said.
Underwriting and pricing for any insurance product are done at the beginning of the policy being issued. The pricing done by for insurance policies is based on the age of the person and the premium is calculated using the mortality table. This is a table which each insurance company refers to and contains details of the rate of deaths occurring in a defined population during a selected time interval, or survival from birth to any given age.
Insurers said that this is a very rigid table and may not be the appropriate mechanism to decide the premiums for life. Hence, even if a person starts leading a healthy lifestyle at a later stage of their life, premiums still go up as the age increases.
Vishakha said that a smoker can become a non-smoker and there is no way to give them a price advantage. So, if a person gives access to their social media profile or adds an insurer as a friend on Facebook, all their personal details including their lifestyle can be viewed by the company. This could be used to either reduce premiums or increase premiums.
For instance, if you are seen smoking and drinking regularly through your social media posts and check-ins at restaurants and bars, the insurer may perceive you as a high-risk individual and charge you differently than a non-smoker or teetotaler.
The insurance companies said that it is still at a nascent stage and would first look at how to maintain a fine balance between the internal actuarial pricing and pricing based on external factors like social media. Once a consensus is arrived, they will have to approach the regulator with the data so that they are allowed to offer such differential pricing.
Product pricing of all insurance products is required to be approved by the Insurance Regulatory and Development Authority of India (IRDAI) before they can be sold in the market. Even if there is a change in the pricing mid-way during the policy term, all such details will have to be notified to IRDAI.
The regulator is slowly moving to the model of risk-based pricing. As a first step to this, insurers have been allowed to offer wellness-based discounts to customers based on how fit they are and the lifestyle they follow in terms of exercise and diet.