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Social media platforms like Facebook, Instagram, and TikTok provide a treasure trove of data that insurers are using to assess and manage risk. By analyzing the online behaviors of both potential and existing customers, insurers can adjust premiums, detect fraud, and engage with clients in more personalized ways.

Let’s dive into how this works.

 1) Assessing risk profiles through online behavior

When you think about insurance, risk is at the heart of every policy. Traditionally, insurers gathered data through health records, driving histories, and questionnaires. But with the rise of social media, this can be enhanced.

Now, insurers can gain valuable insights into customer habits, hobbies, and even health conditions by simply analyzing social media profiles. For instance, someone frequently posting about extreme sports like bungee jumping or skydiving would likely be flagged as a higher-risk individual for life insurance.

Pilotbird, a leading analytics firm, assists insurers by analyzing social media activity to evaluate customer risk profiles. This data, which includes lifestyle choices like smoking or participation in high-risk activities, therefore allows insurers to adjust premiums more accurately.

 2) Tailoring policies through customer segmentation

Social media also helps insurers categorize their customers into specific groups, in which they (insurers) can serve tailored offerings.

Insurers can analyze social media data to identify trends in customer interests—such as whether they prioritize green products, family-focused services, or niche coverage options. This segmentation helps insurers design products that resonate with their customers, making it easier to offer personalized insurance bundles or targeted discounts.

 3) Enhancing engagement and building trust

Trust and engagement with customers can be significantly enhanced through social media. Unlike traditional forms of marketing, platforms like Twitter, Facebook, and even TikTok offer businesses the opportunity for two-way interaction with their customer.

Doing so, insurers can address questions, concerns, and feedback in real time thereby creating a more personalized and transparent experience for the customer, who feels more connected to the company.

Take this Instagram reel by Progressive Insurance. The post has garnered over 5.6 million views and has been reshared more than 600 times. This provides the insurance giant with valuable free publicity, helping to keep its services at the front of the minds of its prospects. It also helps to humanize the brand and foster loyalty, which in turn, reduces churn and boosts customer retention.

 4) A new way to combat fraud

Social media also serves as a useful tool in fraud detection. Insurers can use online data to identify red flags, such as when a claimant’s online activity doesn’t match the circumstances described in their insurance claim.

In a well-known case from 2016, Zachary Barton who had claimed disability payments from the Department of Veterans Affairs was discovered posting gym workout videos on his Facebook page. This led to him being sued by the Department of Justice for committing a federal crime.

Ethical considerations

In the U.S., the use of social media data in insurance raises significant ethical concerns, particularly around privacy and data protection. As we have seen, social media provides a wealth of information. However, insurers must tread carefully to avoid overstepping legal and ethical boundaries.

A prominent issue is the lack of transparency. Consumers may not be fully aware that their online activity can influence their insurance rates, which could feel invasive. In 2019, the state of New York fined Anthem an additional $39.5 million for its 2014 privacy violations, which compromised the personal information of its 78.8 million customers nationwide.

Conclusion

The integration of social media data into the insurance industry is transforming how risk is assessed, policies are tailored, and customer engagement is fostered. While it offers new opportunities for personalization and fraud prevention, insurers must navigate the fine line between innovation and ethical data usage.

Aside from that, online behavior doesn’t always reflect real-world actions or intentions, and basing decisions on potentially misleading information could result in unfair pricing practices. For example, someone posting about adventurous hobbies might be flagged as a high-risk customer, even if their lifestyle is much more risk-averse than their online persona suggests.

Transparency, data accuracy, and respect for consumer privacy will always remain essential. As U.S. insurers turn to and rely on these new data sources, compliance with regulations such as the California Consumer Privacy Act (CCPA) and clear communication with customers will be crucial to avoiding fines, mistrust, and potential reputational damage.