Insurers are in an unenviable position: they need accurate information in order to make sound underwriting and claims fraud decisions, but their efforts to get that information are fraught with questions about privacy. A recent news story (embedded below) broadcast by a Rhode Island TV channel reveals the both the burgeoning public relations challenge and some of the practical deficiencies of insurers' anti-fraud information processing strategies.
The story by East Providence, R.I.-based WPRI about insurers "snooping" on policyholders' social media sites is more fair than many reports - WPRI at least acknowledges the problem of fraud. The report begins with the account of a man who had had his workers' comp payments stopped because his Facebook page was found to include pictures of him living it up on a beach vacation. He eventually won his case, we're told, but no details are provided. A lawyer appears to characterize insurers' use of social media content as a way of embarrassing policyholders during law suits.
Giving the other side a chance, the station also interviewed a private investigator, whom it said insurance companies hire to investigate claims fraud. It also featured Jeanne Salvatore of the Insurance Information Institute (iii), who unfortunately exchanged an "m" for a "b" when she described fraud as costing the insurance industry, and consumers, "$30 million dollars each year." Salvatore was presumably quoting the National Insurance Crime Bureau (NICB) figure of $30 billion, which refers exclusively to property/casualty insurance fraud. The industry-funded Coalition Against Insurance Fraud characterizes fraud as an $80 billion problem, including health insurance fraud of around $50 billion. "It's a very conservative estimate," notes James Quiggle, a spokesperson for the Coalition.
Insurers use of social media for anti-fraud purposes is no more a violation of privacy than the way other companies use such information for marketing and other purposes. The problem is that the concept of what is public and private has changed, and technical advances have outstripped the way people think about what is public and what is private. There is no doubt a market for measures that better govern what individuals choose to share publicly or not. An interesting case in California involves Governor Jerry Brown vetoing a bill to prevent police searching the smart phone of detainees - meaning that huge information that a person could voluntarily withhold in the past, can now be explored by the authorities - potentially including a person's whereabouts and all their recent electronic communications with friends and associates.
It may be that the ability to search smart phones without a warrant will not withstand Fourth Amendment challenges. However, the reality of today is that, by virtue of technology, many actions that were obscure and private in the past, are now visible to parties that want to take the trouble or expense to see them. To the extent that certain information and actions are deemed public, marketers and insurance companies will be able to search them for purposes such as fraud detection. However, insurers won't do a very efficient job if, as in the case of the private investigator interviewed in the WPRI story, they have a highly paid individual - or even a low-paid one - sifting manually through individual Facebook pages. Fraud is a big, $80 billion problem, and effective use of data for fraud detection is a Big Data problem.
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio