Data Ethics in Insurance Claims

Insurance claims present a distinctive set of ethical risks when it comes to data and analytics. That’s because of the one-to-one relationship between claimant and insurer at the time of loss. The data ethics risks in insurance claims fall broadly into three types…

  • the gathering and use of data in understanding the claim and the claimant;
  • The role of analytics in the assessment of claims
  • the influence of optimisation techniques in settlement strategies

I believe that the most serious ethical risks over the next few years lie in claims, and the use of data and analytics is hugely influential to this.  

Opinion

We see of course many examples of how data and analytics can improve the assessment and servicing of claims. Having once been head of insurance for Europe’s biggest motor fleet, I know just how valuable such developments can be. Yet data and analytics are also influencing the fundamentals of how claims are assessed and how settlements are determined. The implications of this for insurance customers are profound.

What is important is for every insurer to develop their claims service with their eyes open not only to the digital opportunities but to their ethical implications as well . All too often, I am seeing developments enter the market with all the focus on the opportunities and little to none on the implications.

Every claims executive needs to be provided with ethical risk assessments for each claims project.  And ethical due diligence should be an ongoing feature of an insurer’s relationships with data brokers and software houses. Recent regulatory enforcement highlighted why this was important.

This guide will provide you with a useful overview of key issues relating to data ethics in insurance claims. It's free to download and can inform your work during the year ahead. 

Articles  

Genetic Data in Insurance Claims

Has the use of genetic testing in insurance claims begun? Many will think that the question is irrelevant, for an agreement with the UK Government prohibits it in virtually all circumstances. Except that it doesn't.

Here's the evidence for it being considered - Has genetic testing in insurance claims begun? 

And here's the problem that needs to be addressed - Insurers must prepare for big changes around generic testing    

What is your firm doing to track this situation? 

Insight 

Predictive Analytics 

The use of predictive analytics in insurance claims is becoming increasingly common. It is also controversial. I expect the tension this creates to produce a huge misconduct scandal in insurance over the next few years. The Liberty Mutual case is a taster for what is to come. 

This article scopes the issues involved...

Why predictive analytics in claims is so dangerous for insurers  

In the fourth quarter of 2020, it became a significant online search term for ethical issues in insurance.  

Quote  |  Duncan Minty, 2020

This quote is about claims optimisation, but it could just as easily apply to genetic data... 

Insurance people... need to take some time to consider, carefully and critically, the consequences of trends like claims optimisation. One technique they could use is the ‘front page’ test – would I be happy to see what I am doing explained on the front page of a leading business newspaper? Would I be prepared to defend the practice on leading news outlets like BBC Radio 4’s Today programme? If not, then why do it?

These type of questions need to be firmly embedded in your claims culture. Do you encourage them? 

Challenge 

Claims Optimisation and Settlement Walking

Is claims optimisation the most controversial insurance innovation of all? It relies hugely on data and analytics, yet has the potential to seriously undermine the relationship between claimant and insurer.   

Is this the most controversial claims innovation of all?

7 reasons why claims optimisation needs to be seen as a failure.

How is your firm managing the risks associated with claims optimisation?  Is your Head of Claims prepared to take the 'front page' test (see panel opposite).

A practice closely related to claims optimisation is settlement walking. Will it go the same way as the now banned underwriting practice of price walking?

Is Settlement Walking now part of UK Insurance?

Consultancy

A Critical Friend

The role insurers most often ask me to perform around data ethics is being a critical friend. I review their approach to data ethics risk from an independent and informed perspective. The reason they often give for using me in this way is that I am seeing risks in ways that others tend not to, and I am backing this up with analysis founded upon academic research.  My approach is pragmatic, but also challenging when needed. it is free of parallel interests, and is firmly focussed on building trust in insurance.

Get in touch if you'd like to have an informal chat.

Challenge 

Ecosystems of Prevention

Data and analytics are often positioned as central to the evolution of insurance claims from post loss settlement to pre-loss prevention. It's a nice idea, but one with a number of ethical flaws. This article explores those flaws and the impact they could have on insurer reputations. 

Are loss prevention initiatives just trojan horses for data harvesting? 

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