IAI Actuarial Core Principles · Business Management · Issues and challenges in each main practice area
A Mumbai-based health insurer wants to use data from customers' wearable fitness devices to offer discounted premiums. The appointed actuary is asked to advise on the main practice challenge that is specific to this emerging use of data. Which issue should the actuary raise first?
The actuary should first raise data quality, representativeness, fairness and privacy or consent. Wearable data can be biased towards healthier, tech-savvy customers and is personal information, so pricing with it creates both technical and ethical challenges that must be addressed before use.
- AWhether the wearable data is accurate and representative, and whether using it is fair and respects customers' privacy and consentCorrect
- BWhether the insurer's logo can be shown on the wearable devices
- CWhether premiums can be rounded to the nearest hundred rupees
- DWhether the discount will make the insurer's advertising cheaper
- Whether the wearable manufacturer's share price is rising
Explanation
Using new data sources in pricing raises questions of data quality, selection bias, fairness and privacy or consent. These are core challenges for actuaries in emerging areas. The other options are trivial or irrelevant to the technical and ethical risk.
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