We all know that user data is labeled as the new oil of our economy. But it comes with certain concerns of user privacy. How can businesses deal with the tension and privacy concerns? How to create responsible business models that monetize privacy-sensitive user data?
Insurance company business model
ENVISION researcher Mark de Reuver looked into this matter for you and focused on car insurance. The insurance industry has had the same business model, not for decades, but already for centuries. A large pool of people pays a fee to the insurance company. In return the insurance company reimburses the damages. The better insurers can predict the risk of accidents, the more fair fees they can offer.
Innovation in car insurance
With the rise of smartphones, insurers can potentially get a lot of useful information to base their risk calculations on. The simplest is to use the GPS information: people who drive less kilometers, should get a discount on their insurance fee. However, we can even do more than that. In general, smartphones can sense the G-forces of the car movements. For example, sudden breaking for avoiding near accidents creates high G-forces, and insurers could use this information to reward safe driving style.
The data wants to be shared
Of course, disclosing data from a person’s smartphone entails always privacy risk. We did an experiment on whether people are willing to give up their privacy-sensitive data. We found out, that even for a marginal discount (of a few euros per month), most people are willing to share their data with the insurance company. If insurers offer better and more fair pricing schemes, the discount can even be lower.
People are willing to give up privacy
What does the case of mobile insurance business models tell us? Yes, businesses do need to be aware of privacy risks when monetizing data originating from their users. As a trade-off, consumers are willing to give up part of their privacy, if they get a better offering.
Business model pattern: It is accepted, that a company monetizes user data, as long as the user is rewarded with better offerings, or seemingly fair pricing schemes.
More detail, see: http://link.springer.com/article/10.1007/s12525-015-0211-0