Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • Sections
  • Students

Student: The doctor in the data

Open-access content Tuesday 14th April 2020 — updated 1.08pm, Wednesday 6th May 2020
Authors
MACIEJ ZABÓJ

Macie Zabój looks at how personal monitoring devices could revolutionise preventive health insurance

web_p40_student_april20_scarsbrook.png

The traditional pricing model works to capture policyholder data during the quotation process. This means that the risk is assessed at that point in time, with a predefined discriminating factor (such as smokers vs non-smokers). This data may be updated following results from health assessments (such as blood tests) to assess whether, say, a non-smoking habit has changed.

Preventive life insurance takes a different approach. The information gathered via the traditional approach – self-reported risks and habits – could be extended using data obtained from a personalised monitoring device. Currently, these devices track basic health factors, such as sport activity, pulse, blood pressure, body temperature and oxygen saturation. They are available at relatively low cost, and the credibility of the information they provide is reliable. This could allow risk pricing to go beyond traditional demographic segmentation and move towards a new approach incorporating behavioural patterns and sociodemographic characteristics.

The real-time data would provide a great opportunity for actuarial data analysts to define and update predictive models on a regular basis – though any approach to gathering and processing data must follow general data protection and anti-discrimination regulations. 

This would allow us to set the initial premium on the basis of past data and adjust it as the risk changes, combining a simplified life questionnaire, past data from a personal electronic device, and online activity into the premium calculation. 

The pricing process could incorporate unsupervised machine-learning techniques to identify the relationships between different sources of data. Updates could also be available at the policyholder’s discretion – for example, when a new risk is being included. This would allow insurers to define specific actions and test the effectiveness of potential claims incidence and value – as well as support the predictive model.

Aside from the risk, expenses may have quite a substantial impact on pricing, especially taking into account the overheads involved in implementing a new business model. However, the preventive effect should lead to lower claim frequency and average claim payment, pushing costs down in the long term.

A huge benefit to regular health monitoring devices would be the associated improvement in life expectancy. If the wearer’s vital signs fall to critical levels, it could draw the attention to the policyholder, medical personnel and people nearby. Time is of the essence when it comes to heart attacks and strokes; if warnings could be immediately issued to local first responders, they could get to the wearer much faster, mitigating the negative consequences of the insurance event.

Wearable devices could help medical services to determine exactly where the policyholder is, and by prolonging life expectancy, would help to run down premiums. It could also help extend the policyholder’s product offer, based on their personal behavioural patterns and attitude to risk.

Implementation of this new business model could work in favour of both policyholders and insurance companies. A policyholder could receive valuable and regular information about their health status –  prolonging their life expectancy in certain cases, and helping them to pay an lower regular premium overall. 

For insurance companies, this model could mean lower claim payments and higher quality data with which to price risks. 

Maciej Zabój is a guest student editor

Filed in
Students
Also filed in
Students

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

New Fast-Growing Team - Actuarial Systems Development

London (Greater)
Excellent Salary Package
Reference
143762

Actuarial Pension Consultant – Scotland/Remote – Up to £90,000 plus bonus

Edinburgh / Glasgow / Remote working
Up to £90,000 + Bonus
Reference
143761

Part Qualified Pensions Actuary– Specialised Pensions Consultancy - Scotland/Remote - Up to £70,000

Edinburgh / Glasgow / Remote working
Up to £70,000 + Bonus
Reference
143760
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ