How do we know?  Simple, read this - WSJ article.

We talked a couple weeks ago about technology advances that will make the underwriting process more streamlined.  One of the points in that discussion was that a third party was really the type of firm to develop that technology via a universal platform.  This takes that concept to an entirely new level.

Per the article referenced above, rather than an insurance company requiring the traditional exam, they would instead purchase a data package from a third party that could include information as far reaching as purchasing patterns on line, credit scores, television watching habits and more.  The arguments in favor of this type of approach are the lower cost and the reluctance of some potential clients to submit to the exam.    While I don't dispute the fact that the exam can sometimes be a barrier to buying, I think that the firms involved in this are missing the fact that there are a large number of consumers who will not be comfortable with the new approach.  The obvious problem - privacy concerns.

Of course, that cat may already be out of the bag.  The only reason that the insurance companies are looking at this type of strategy is because the data already exists.  The push to use it comes in large part from a desire to turn this data into cash on the part of the firms that own the information. 

How far could this really go?  One of the examples given by someone from a data collection firm that is already involved in this type of project with insurers gives an example involving a client's denial of any family history of cancer combined with their support of a cancer research group.  The obvious implication being that the client is not disclosing a family history of cancer.  This is the first step down a path that we have all experienced in underwriting at one point or another - the feeling that the client is being viewed as "guilty until proven innocent" during the underwriting process. 

Just imagine the conversation:  We have reason to believe that the client supports cancer research.  Please provide the name of the organization they support, contribution level, reason for support and duration of their relationship with the organization.  Try explaining the relevance of that to a client!  Or the process of dealing with incorrect information in your "permanent record"?

As much as I am in favor of more effective ways of doing business, I certainly hope that the insurance companies think this all the way through before implementation.  I think the possibility of removing one barrier - the exam - only to replace it with another - concerns about privacy - could prove to be nothing more than a waste of time and energy. 

Have a great Thanksgiving,