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Monday, December 10, 2012

Big Data, Privacy, and Insurers: Forget the web, Flo’s the one to watch.

    At least within the corner of the web that I frequent, it seems that I cannot go more than a few pages without running into articles discussing the never-ending growth of the Big Data industry, the death of online privacy, and how long it will be until we are all subject to 1984-esque surveillance.  These issues have been particularly interesting to me, given that, like many of us, I maintain a presence on a number of social media sites.  If at all possible, I would prefer to control who has access to the embarrassing high school yearbook photos that were posted to my Facebook wall, my Amazon.com browsing history, and the contents of the Christmas list I sent to my family.  Even when I have given my consent to certain entities to access this information, I'd like to restrict how they use this data, limit its transferability, and have some type of assurance that adequate securities measures have been put into place to protect my data.  While I recognize that the dissemination of this information would, in most cases, have little to no detrimental impact on my life, the ease with which third parties could aggregate data about me makes me quite uneasy. The public uproar that results every time Facebook changes its privacy settings establishes that my feelings are widely shared.  It is no surprise that the law’s regulation of web-based information has become one of the hotter topics in politics and legal academia (I've particularly enjoyed a forthcoming piece written by one of my colleagues: Prof. Bedi’s Facebook and Interpersonal Privacy).

    While there are good reasons that the data privacy discussion has centered on the Internet, I have found myself wondering whether this focus has diverted attention away from the rampant expansion of offline data collection.  Given my scholarly interests, it is unsurprising that the best example of this phenomenon that I can point to comes from the insurance industry.

     Insurance companies, by their very nature, have an insatiable appetite for data.  The more information they collect about their customers, the better they can estimate the odds that the company will have to pay out on its policies and set their rates.  While insurers have always been hungry for information, their data collection efforts (particular in casualty lines) have traditionally been limited to what the applicant discloses in the insurance application and public records. 

    Recent developments in the auto insurance industry may (at least in my mind) herald the beginning of a new era of aggressive approaches to data collection.  Over the past two years, Progressive has increasingly offered consumers the opportunity to reduce their premiums if they agree to allow Progressive to monitor their driving habits via wireless technology (the “Snapshot” discount).  While Progressive’s observation period is limited in both duration and amount of data collected (e.g., braking habits are recorded, GPS data is not), it is easy to see how market incentives will push auto insurers to try and collect increasing amounts of data about—or continuously monitor—their policyholders.  Further, if such programs are widely adopted throughout the industry, consent to monitoring could become a market-imposed mandatory condition for obtaining coverage.  Finally, there do not appear to be any reasons why this type of data collection would not spread to other lines of casualty insurance.

     While there are factors that will limit the expansion of this trend (collection and processing costs, state insurance regulations, social pressures), I anticipate that we have only seen the tip of the iceberg when it comes to insurers' taking an active approach towards data.  I will save my thoughts on why this type of data collection is particularly worrisome (as well as its potential upside) for another post.

Posted by Max Helveston on December 10, 2012 at 12:52 AM in Information and Technology | Permalink

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While I'm interested in your scholarship, I find it tedious to read "this data" and "to try and collect increasing amounts of data." In scientific articles, folks try to follow the rule that "data" is a plural, as are "media," "strata," and "errata."

"Try and collect" is a bogus construction. The clause should read "to try to collect increasing numbers of data." You can't have amounts of data any more than you can have amounts of items in the checkout lane.

Posted by: Jimbino | Dec 10, 2012 11:45:11 AM

Too much time on your hands Jimbino?

Posted by: newfirstyrprof | Dec 10, 2012 12:44:28 PM

The problem, newfirstyrprof, is that you don't understand the perversity of the Descriptivist School of linguistics, such as is maintained over at Language Log. Their method of determining proper grammar is to google or n-gram every phrase. Depending on the number of hits, they deem it Proper English or not.

We protectors of the English language can't allow that to happen; hence, we have to object every time to instances of improper usage so as not to see them deemed "proper English" by Language Log Descriptivist googlers--particularly those errors in serious articles written by professors who presumably took SATs or GREs and who ought to know better.

I admit to the one advantage that Descriptivists have over Prescriptivists: they don't actually have to bother to gain any knowledge of English grammar, since anybody can google.

Posted by: Jimbino | Dec 10, 2012 1:03:02 PM

Max,

Thanks for this post.

I too am concerned about the Flo-ization of data, though in a context broader than insurance. Pre-Flo data threats came from online monitoring, etc. You could choose to avoid this monitoring by using DuckDuckGo, Tor, Hushmail, or simply using the yellow pages rather than Googling the restaurant at which you want to eat tonight. Flo promises a monetary return on our "investment," which is the complete abandonment of privacy. Who wouldn't want to save hundreds of dollars on car insurance by having Progressive monitor when we brake? Flo is changing the costs and benefits of abandoning our privacy, but is also changing the role of the players. Prior to Flo, I received nothing for abandoning my privacy by going online (the benefit of going online and its conveniences notwithstanding, there were ways to avoid that market, like the yellow pages and the U.S. postal service). In the Age of Flo, I may receive serious discounts for abandoning my privacy, and these discounts could accrue in discriminatory ways. This is the case with car insurance (Progressive), health care (what if I get a discount on health insurance in exchange for my company monitoring when I go to the gym and what machines I use there), and just about any other area of life.

With such savings accruing in exchange for the abandonment of privacy, it is no longer Google or some other tracker that collects data about me--it is I who "willingly" abandon my privacy for money, or if not money for the right to participate in society (not unlike being forced to sign a release if you want to participate in some risky activity). This is the essence of the panopticon and Big Brother, who is successful when he longer has to police you--you police yourself.

Posted by: Steven R. Morrison | Dec 10, 2012 2:30:50 PM

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