Biometrics, or the measurement and analysis of unique physical or behavioral characteristics as a means of verifying personal identity, is being explored across financial services. The insurance industry is no exception, as carriers work to familiarize themselves with the latest emerging technology that encompasses everything from fingerprints to voice to facial structure.
Donald Light, director of Celent America’s P&C insurance practice, says insurers have some catching up to do compared to banking, technology, and security firms. However, he expects insurance use of biometrics “will grow probably pretty quickly over the next two to three years.” That includes use cases around cybersecurity, ease of access and customer experience.
“With this technology, members can use something they are – like their face or voice – to provide an additional layer of security to verify their identity,” said Gary McAlum, chief security officer at USAA.
McAlum says that USAA started offering biometrics in late 2014 and now has more than two million customers using the technology through its mobile app. The company offers members a choice between three multi-factor authentication options: quick logon PIN, facial or voice recognition. Along with a trusted device, this helps customers communicate that they are who they say they are better than a single-factor username-password model, according to the company.
“Biometrics offer ease of use and enhanced security, particularly when paired with multi-factor authentication tools like those built into USAA's mobile app,” he said. “Biometric logon tools, like all technology, will need to evolve to stay a step ahead of those seeking to commit fraud.”
McAlum says there is a misconception among customers that traditional knowledge-based authentication, like passwords and security questions, is safer than using multi-factor authentication.
“We must continue educating members that using known-based log in and passwords results in a higher risk of experiencing fraud,” he said.
Impact on product
Security and access control are not the only ways in which biometrics is poised to shake up insurance. “There is a real opportunity to transform customers’ buying experience, and doing it in a way that has a minimal impact on cost to the consumer,” says Michael Taht, EVP of research, analytics, and underwriting at Munich Re. The company is especially interested in the potential for data from wearable technology to aid in risk selection.
“We’ve had some discussions on different providers on wearable information,” Taht, who was appointed to his current position in July, adds. In his role, he is responsible for overseeing all biometric research and integrated analytics efforts. He has worked in the company’s Atlanta office since 2008 and most recently ran marketing and pricing for the company’s individual life and living benefits departments.
Taht called the current state of biometrics in insurance “exciting,” and pointed to underwriting as a potential business function as to where biometrics can help the industry.
“Underwriting selection methodology is changing, and changing pretty quickly, so that creates some real opportunities to look at the biometric risk differently,” he said. He also mentioned that the company’s goal is to ensure that any changes to underwriting can be accurately reflected in terms of a price to the customer.
For example, the insurtech Lapetus recently partnered with Legal & General America on a new initiative, SelfieQuote.com. Lapetus’ technology allows customers interested in life insurance coverage to upload a selfie, which will estimate an individual’s age, gender, and body mass index, then refine by asking the customer follow-up questions. After a quote is determined, a more robust underwriting process takes place before a policy is bound.
Karl Ricanek, co-founder and chief data scientist at Lapetus, says it is still a challenge to educate the insurers on biometrics’ potential. He says his goal is “sharing and getting the insurance community to understand that the use of biometrics is something that can replace their traditional system.”
Those traditions include getting your blood drawn before purchasing insurance, an invasive and inconvenient procedure. According to Ricanek, Lapetus’ biodemography and facial analytics are “far more predictive of a person’s longevity than bloodwork.”
Light agrees, pointing to the fact that no policy or billing system has ever had to accept biometrics before as a potential roadblock. “You need a change in technology in order for it to become widespread,” he said, while also saying it is not a difficult change to make.
As for the future of biometrics, insurers and insurtechs alike are hopeful. Taht believes the industry will move slowly, but make significant process over the next few years.
“It will feel a little slower than what people think it can be over the next couple of years,” he said. “But when we look back five years from now, we are going to say ‘wow, it’s changed a lot.’ It will be incremental change and it will be occurring across multiple insurers and it will be hand-in-hand with different distribution options.”
