The Rise of Surveillance in Insurance: When Your Policy Becomes a Privacy Concern
From driving apps to drone surveillance to artificial intelligence, how insurance companies are quietly collecting data
In recent years, insurance companies have embraced new technologies and tactics to assess risk and determine premiums. To no one’s surprise, Artificial Intelligence (AI) is starting to play a central role.
While these innovations may lead to more accurate pricing and potentially lower rates for some customers, they also raise significant privacy concerns. Below we explore some emerging trends that are reshaping the insurance landscape and potentially compromising your privacy.
Home Insurance: Eyes in the Sky
Home insurance companies are taking to the skies, quite literally, to evaluate properties. Some insurers are now using drones, airplanes, balloons and satellite imagery to inspect homes and make underwriting decisions.
Drone Surveillance
Insurance companies are commissioning private firms to capture aerial images of properties, often without the homeowner's knowledge or explicit consent. These drones can identify issues such as:
Damaged roof shingles
Yard debris
Overhanging tree branches
Undeclared swimming pools or trampolines
Satellite Imagery
The industry-funded Geospatial Insurance Consortium has cataloged approximately 99% of U.S. homes. This vast database allows insurers to:
Assess property conditions remotely
Identify potential risks
Make decisions about policy renewals or cancellations
The implications of this aerial surveillance are significant. In one case, a woman from Modesto, California, had her home insurance policy abruptly canceled after nearly 40 years of coverage. The reason? The insurance carrier used drone footage to observe her ongoing home renovation project, deeming it too risky to insure. (source)
Auto Insurance: Your Car as a Tattletale
The realm of auto insurance has seen a similar shift towards data-driven decision-making, with many major insurers offering usage-based insurance (UBI) programs.
Telematics Devices
These small devices plug into your car's onboard diagnostic (OBD) port and collect a wealth of data, including:
Mileage
Speed
Acceleration and braking patterns
Time of day you drive
Smartphone Apps
Some insurers have moved away from physical devices, instead offering apps that use your phone's sensors to track driving behavior.
The data collected through these methods is often more extensive than drivers realize. For example, one GM vehicle owner discovered that his car had recorded details of 640 trips over six months, including start and end times, distance driven, and instances of speeding or hard braking. (source)
The Role of Artificial Intelligence (AI)
AI tools are revolutionizing how insurance companies monitor policyholder properties, enabling more accurate risk assessment and proactive loss prevention.
Using high-resolution aerial photography and satellite imagery, AI algorithms can analyze hundreds of data points to provide up-to-date assessments of roof conditions, fire risks, the presence of undeclared features like pools or trampolines, and other factors impacting risk and valuation. For example, some solutions offer a Roof Condition Rating that analyzes hundreds of different data points to accurately assess roof condition without requiring an in-person inspection.
This means the opportunity for insurers to decline coverage will increase since AI allows the processing of larger volumes of data. Pre-AI, insurers were limited by the number of humans they could hire to process and evaluate claims and applications. AI tools remove that friction.
Additionally, AI is enabling insurers to leverage data from smart home sensors and Internet of Things (IoT) devices for real-time monitoring of properties. This allows for proactive risk management, alerting both the insurer and homeowner to potential issues like break-ins, fires, or water leaks before they escalate into major claims.
Privacy Implications and Concerns
While insurers argue that these technologies allow for more accurate risk assessment and potentially lower premiums for safe drivers, they also raise several privacy concerns:
1. Data Security: The vast amount of personal data collected is attractive to criminals and law enforcement. It’s also vulnerable to breaches, which will lead to misuse. Foreign actors may even want access to the data, posing a risk to national security.
2. Lack of Transparency: Many consumers are unaware of the extent of data collection or how it's used. Would policyholders behave differently if these tactics were properly disclosed?
3. Potential for Discrimination: Detailed driving data could be used to unfairly penalize drivers based on factors beyond their control. In other words, the data may inadvertently create new forms of discrimination or amplify existing biases in ways that are difficult to detect and address.
4. Mission Creep: Data collected for insurance purposes could be shared with third parties or used for unrelated purposes. Geolocation data in particular is valuable to marketers and Bad Actors.
5. Legal Implications: In the event of an accident, this data could be subpoenaed and used in legal proceedings. And will the data provide the proper context while being used against you?
Protecting Your Privacy
As these surveillance technologies become more prevalent, consumers should take steps to protect their privacy. Here are some items to consider:
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