product development
Smartphones, RFID-chips, fitness apps, intelligent vehicles, and social media used by people in Germany create countless data that open up innumerable possibilities for insurers and intermediaries.
Risks can be better determined by means of evaluating such data; insurance products can be improved and the target group of insurance products can be specified. This becomes more important, as Solvency II and IDD need to be implemented in terms of supervision law.
Moreover, data of all kind can also be used in other ways than only for abstract evaluations. A particularly healthy lifestyle reduces the insured risk of health insurance, whilst the risk may increase for the same reason with regard to life insurance. Not only the road behaviour of its policyholders is of interest to an insurer, the insurer can also use data from a safety system or the dispatch of goods of a warehouse in order to check the calculation of premiums and reserves.
At the same time, the insurer may channel the behaviour of the policyholders or their employees by granting advantages for risk-minimising behaviour. Unlike the no-claim bonuses in case of motor insurance, insurers may identify risk factors a good deal more precisely and react accordingly due to the significantly increased amount of data.
However, data protection law – and particularly the General Data Protection Regulation effective since May 2018 – sets strict limits to this use, under the threat of sanctions of up to EUR20 million or 4% of a company’s worldwide annual revenue. At the same time, entire insurance tariffs are threatened to fail from a contractual perspective if they are based on inadmissible data processing.