Sometimes, the darkest timeline comes quicker than you expect. Last year, Jathan Sadowski noted that insurance companies were fawning over the Internet of Things—smartphones, fitness monitors, wearable computers, and anything else with a sensor and WiFi—with an eye to tapping its behavioral data. The affection, of course, was mutual; the Internet of Things industry, backed by optimistic growth projections from its own analysts, presented itself as a natural partner for insurers.
Last May, O’Reilly Media czar Tim O’Reilly predicted that “insurance is going to be the native business model for the Internet of Things”—a turn of events that should disturb us, Sadowski argued.
For once, the meme hustler O’Reilly was right. The problem is, so was Sadowski. Insurers and devices manufacturers have quickly united over their shared love of data—our data—and insurance customers are starting to see the effects. Real-time pricing, behavioral nudges: these are the new costs of being insured.
This month, John Hancock Insurance—whose patriotic namesake might be disappointed that the company is now a wholly owned subsidiary of Canadian giant Manulife Financial—announced that it would distribute rebates to life insurance customers in exchange for access to their fitness monitor and location information.
Car insurers like Progressive are discovering the value of real-time telematics data, culled from GPS units or special devices that can track whether you brake too hard. (Want to gag a little? Check out this British insurer using information from car computers to encourage motorists to “drive like a girl.”)
This is the first wave of insurance companies capitalizing on the explosion in personal data, and it looks to get worse. Trade publications are awash with rosy stories about the profits to be extracted from modifying premiums not just once or twice a year, but every day. Soon, rates will be adjusted in real time. As one insurance consultant told Forbes, “the healthier you get the lower your premiums go.” The corollary is that if you get sick or injured, or if you do anything that the insurer’s algorithms deem unhealthy, your premiums will increase.
Startups with names like stickK and Wildflower, inspired by the latest developments in behavioral economics, are offering similar services. They’re also devising individualized rating systems, health scores, and points that can be redeemed for rewards (or taken away for bad behavior).
While insurers have long collected consumer data, often to aggregate customers into demographic clusters, this is a dramatic shift. As insurance becomes increasingly personalized and tied to one’s daily actions, the implied social contract of insurance—that a whole bunch of us contribute similar amounts into a shared fund to cover those who need it—is being upended.
And in the case of health care, it is another step away from any sort of nonprofit, single-payer, or government-run insurance that would cover everyone equally.
As these schemes proliferate, imagine the kind of behavioral management that can be accomplished. What happens when you drive a little too fast on the way to the gym, and your health insurer rewards you but your car insurer slaps on a penalty? What happens when BlueCross knows what’s in your smart fridge? Your life becomes a series of overlapping—and often competing—rewards programs, gamified events, penalties, coupons, warnings, alerts, and nudges. Practically your entire existence becomes subject to dynamic surge pricing.
Quantified selfers and others besotted by their own data may find ways to master this system. Some startups offer to “turn [data] into an experience,” providing daily charts, analysis, and shareable reports. Those with less time, money, or technical ability will find themselves paying more than this class of adepts. Opting out will carry its own penalties.
This kind of surveillance, or dataveillance, represents an invasion of the market into ever more intimate, granular parts of our lives. When a Google executive recently advised attendees at a journalism conference to “monetize the everyday ‘moments’ consumers spend online,” the same logic was at work. Uber and Airbnb present themselves in a similarly utilitarian fashion: a parked car or an unoccupied home is an idle resource that could be exploited. Now our personal data is an idle resource. Consider this AP headline from earlier this year: “Wearable Sensors Gather Lots of Data—Now to Make It Useful.”
When companies are out to collect real-time data on us and then tie it to various inducements, every moment that they are not calculating, adjusting, and optimizing our value in relation to them seems like another moment wasted. And in this world, we know, nothing is worse than an unaddressed inefficiency.