The Connection Between Online Safety Habits and Insurance Rates

The modern insurance industry relies on countless factors when establishing risk profiles for potential customers. What you may not know is that the way you use digital platforms and how well you protect yourself is one of those factors. With identity theft, fraud, and phishing scams on the rise, insurers must account for your vulnerability. Unfortunately, there’s little you can do to find out which of your habits and behaviors an insurer may have data on. What you can do, however, is develop the right skills and habits to reduce your online risk. Then, no matter what an insurer looks at, they’ll find a responsible and careful internet user. Here’s everything you need to know.

Why Online Behavior Is an Insurance Risk Factor

The key to insurance rates is your insurer’s estimate of your exposure to potential losses. Today, online behavior is a significant risk factor that impacts potential loss exposure. For example, if you’re a regular user of online banking, you’re immediately at risk of victimization via a phishing scam. Meanwhile, someone who never uses online banking is at little risk of falling for such scams. Since online risks often result in claims against homeowners, renters, and identity theft policies, insurers must consider your odds of incurring losses related to your digital habits. If they spot signs of frequently compromised online accounts or multiple past identity theft claims, you’ll end up in an elevated risk category.

The Scope of Identity Theft as an Insurance Issue

Before the mass adoption of the internet and the digital services it enabled, identity theft wasn’t much of a concern to insurers. At worst, it represented little more than an inconvenience to victims. Today, however, a criminal who steals identity data can use it to wreak financial havoc on a victim’s life. They can redirect wages, empty banking and investment accounts, or even run up massive credit debts. Plus, the victim typically incurs high legal costs as they try to pick up the pieces after an identity theft incident.

As a result of that, insurers have had little choice but to offer policy add-ons covering identity theft and cyber liability. Those add-ons typically reimburse legal fees, cover the cost of credit monitoring, and even make policyholders whole by reimbursing losses from fraudulent transactions. The increasing frequency of such claims has left insurers little choice but to consider policyholder behavior as an underwriting factor.

How To Reduce Online Risk Exposure

The good news is that there are plenty of things you can do to reduce your online risk exposure. In doing so, you’ll improve your personal digital risk profile in the eyes of insurers. That should lead to lower insurance rates across a wide swath of policy categories. To start, you should follow several well-established online safety tips. Four of the most important tips follow.

Improve Password Hygiene

One of the most important ways to safeguard your online accounts is to practice good password hygiene. For starters, you should never reuse passwords on multiple sites or services. You shouldn’t even reuse parts of passwords. That alone means a single stolen password doesn’t give a criminal access to your whole digital life. Wherever possible, you should also enable two-factor authentication. And you should enable passkeys on every financial site that supports them.

Beware of Untrusted Networks

If you travel frequently or have a habit of using public Wi-Fi hotspots with your devices, caution is warranted. Cybercriminals often set up hotspots meant to mimic the names of well-known free internet service providers. When you connect, they can monitor everything you transmit over the connection. At a minimum, avoid logging in to banking or other financial sites while using public Wi-Fi.

If you have no choice but to rely on public Wi-Fi hotspots, you should use a trusted VPN. A VPN wraps all your devices’ data in an extra layer of encryption. That would prevent interception, even if you accidentally connected to a compromised hotspot.

Keep Devices and Apps Updated

Cybercriminals often exploit vulnerabilities in devices, software, and operating systems to steal personal data. You can’t eliminate the threat, but you can work to minimize it. To do that, make sure to update your devices and software frequently. If you’re technically adept, you can consult an exploit database to check your most-used software for known vulnerabilities. Then, you can look for patches to apply or avoid using the software until a patch becomes available.

Freeze Your Credit Reports

One of the most effective ways to blunt the impact of any identity theft incident is to freeze your credit reports. Doing so prevents anyone from opening new credit accounts in your name. Best of all, it costs you nothing to do this. Just notify all three major credit reporting firms that you want your report frozen. You’ll need to lift the freeze before you can open a new account. But the process is quick and easy, and the inconvenience is well worth the protection you gain.

What Insurers Will See

Once you put the above tips into action, insurance firms will take notice. For example, they will see your secure password habits the moment you create an account with them. After you stick to the tips above for a while, insurers will also see additional results from your efforts. They’ll likely see that you haven’t had any accounts compromised for some time. And they’ll see that you haven’t suffered any identity theft incidents. The longer you keep your record clean, the lower your risk category will be.

The Bottom Line

The actuarial models used by each insurer to determine risk will always be a black box. As such, you can never know for sure exactly what factors a given insurer will evaluate when setting your policy rates. However, implementing basic online safety and security measures will work in your favor. And even if you see no immediate movement in your insurance rates, you’ll certainly avoid becoming an easy mark for any cybercriminal that attempts to target you.