Too much info not always a good thing

Is it reasonable for life insurance companies to demand that their customers try to get fit? Reasonable or not, it is already happening. John Hancock, a life insurance company in the US, has announced that it will in future only write policies that offer rewards for customers who use various forms of fitness trackers or join gyms. Similar offers are available in Britain.

But if the process is carried to extremes, it could undermine a fundamental principle of any insurance market. Insurance works because we are ignorant of our individual fates. The fact that any of us might turn out to be a bad risk makes it sensible for everyone to insure against that remote chance. But insurers want customers who avoid misfortune. The two aims are reconciled because both sides operate behind a veil of ignorance. The balance between knowledge and ignorance of risk has traditionally been struck at the level of statistical knowledge about large groups. But those groups are getting smaller in the age of big data.

One US data company uses 442 non-medical attributes to predict medical costs and so which clients are profitable to insure. The risks must be shared between healthy and unhealthy, rich and poor. Penalising unhealthy behaviour with worse or less insurance injures those who really need protection. Given the correlation between unhealthy lifestyles and lower incomes, the risks are only too clear.