Big Data can now provide you with the most likely scenario of how and when you will meet your end. So what will it mean for the future of risk management and lifestyle planning?
Statistician Nathan Yau’s FlowingData online platform carries the alarming – yet irresistible – title of How You Will Die. Plug in your gender, ethnicity and age and, if you live in America, you will get an immediate readout of your mortality prospects over time, along with your most likely cause of death.
If you are a 37-year-old Asian female, for example, you have only a 2 per cent chance of dying within the next two decades – but if you do fall among that unlucky 2 per cent then you will probably die of cancer. Your chances are exactly 50-50 of living another 50 years, and at the ripe old age of 87 the greatest threat to your life is now a circulatory ailment.
Modelling for mortality
FlowingData crunches information on roughly 40 million deaths in the United States, stored at the Centers for Disease Control and Prevention to create statistical models for an individual’s longevity prospects. The platform provides an accessible and intuitive way for ordinary people to grasp data that Yau says can be “dry or disconnected” – and therefore help them make the right choices for the future.
“The platform provides an accessible and intuitive way for ordinary people to… make the right choices for the future.”
“Simulations can be helpful here. Relatable ones. People can gain a rough idea of what's going to happen in the future,” says Yau. “From there, you can make data-informed decisions for further down the road, such as retirement.”
It is an example of data analytics that actuaries and insurers are increasingly using to build the future of risk management and lifestyle planning. This technological revolution marries Big Data with cloud computing, artificial intelligence, genetic analysis and even virtual reality. "Artificial intelligence holds vast potential for insurers interested in reinventing their business models and transforming customer experience,” according to the American IT services company, Cognizant.1
Wearable body monitoring devices such as FitKit, Google Watch and AliveCor are supercharging the Big Data revolution in insurance, providing a mother lode of instant, real-time health data to fine-tune risk management – while also giving medical practitioners powerful tools to monitor diseases. The emergence of “e-health” will help consumers both in terms of their fitness and their wallets. Insurers can send health tips – such as exercise advice – based on readings from such devices. And they are beginning to offer policy discounts for sharing the data. US insurer John Hancock, for example, launched an Apple HealthKit-enabled app that rewards policyholders for logging healthy activities on iPhone and Apple Watch – giving points toward cheaper premiums.
“Insurers and customers are increasingly seen as partners, working together on strategies for healthy living.”
For the consumer, these technologies will provide precise, granular readouts on your current health and future expectations. That will help people make the best decisions about lifestyle choices, such as diet and exercise, saving for retirement and crafting bespoke insurance plans to suit individual needs. Charles Clark, Milliman’s head of employee benefits research, cautions that forecasting is not an exact science and “when you show a number to the penny, you imply a precision that does not exist”. But next-generation tools are growing in power and sophistication. And insurers and customers are increasingly seen as partners, working together on strategies for healthy living.
Harnessing new computing power
The virtual patient
European researchers are developing a computerised “guardian angel” who will help individuals make the right health decisions – and insurers manage risk
Imagine having a virtual twin who lives in a super-computer and shares your genetic and biological information. This alter-ego grows older with you, updated regularly in line with your lifestyle choices and any health check-ups or medical treatments you may have had. The twin becomes a “guardian angel,” able to warn you of health threats far into the future by running your virtual self through computer modelling.
The EU-linked Future Health initiative is pooling resources from Europe’s leading research institutions to make this scenario a reality in the foreseeable future. Computer models of individuals will combine with machine learning and imaging technologies to give us a roadmap for better, healthier living. The implications for the insurance industry are significant, potentially yielding powerful methods to manage risk and help people plan their future.
The virtual patient will revolutionise healthcare by allowing researchers to develop and test new drugs based on computer-based clinical trials. Future Health coordinator Hans Lehrach, director of the Max Planck Institute for Molecular Genetics, likens the concept to putting new car models through thousands of virtual crash tests. “You don’t want to risk people and money if you can first find out on a computer,” he says. “We now have the technology to apply this strategy in medicine.”
The technology is expected to usher in an era of personalised medical care, with strategies based on “a detailed computer model of our individual biology,” according to the Future Health mission statement. Our virtual twin will “help to guard against incompatibilities between us and the drugs we take, the foods we eat and even the exercises we do”.
Cloud computing is harnessing the oceans of data flowing into the servers of actuaries and insurers. It is reshaping the field of risk management by maximising efficiencies, automating workflows and making statistical modelling a creative collaboration of the best human and artificial minds.
“Cloud computing is harnessing the oceans of data flowing into the servers of actuaries and insurers.”
If the Cloud is the arena for the insurance revolution, artificial intelligence is its brain. AI is already permeating every aspect of the industry, from consumer interaction to financial advice to basic underwriting. Soon, however, there will be a quantum leap in the role of robotic intelligence in charting the frontiers of risk management. Advances in natural language processing and machine learning will make robots your trusted insurance agent. Homes wired by the Internet of Things will provide an invaluable stream of data on human behaviour for risk modelling. And AI will play an ever more creative role in anticipating risk trends and developing new business approaches, in partnership with humans.
“Advances in natural language processing and machine learning will make robots your trusted insurance agent.”
Artificial intelligence will play a fundamental role in the key challenges people face, according to an article by Marie Kratz, an actuarial expert at ESSEC Business School in France, as it will be able to make “a rapid analysis of the situation and therefore an effective calculation of premiums and drafting of contracts”. “But that is not all,” she added, “using AI will largely facilitate the task of analysing accidents, disasters and the damage caused by them.”
Beyond such mind-stretching technologies, researchers are already developing insurance-related innovations that sound like science fiction but may be just around the corner. Companies such as Proteus Digital Health are in hot pursuit of digital medicines – ingestible sensors attached to drugs that send feedback on their efficacy. And scientists at the EU-linked Future Health project are creating virtual patients – from genetic and biological inputs of real people – on which to test new medical diagnostic and treatment methods. (SEE SIDEBAR)
It’s a brave new world. Insurance innovation may help us navigate it to achieve better, healthier lives.
This content was produced by FT², the advertising department of the Financial Times, in collaboration with Milliman.