City watchdog the Financial Conduct Authority is gathering evidence on the use of big data in the insurance market in a move which could trigger a full-scale inquiry amid claims that some firms are trawling the likes of social media sites to gather detailed data on consumers to set their premiums.
There is growing consumer concern that their personal data is being exploited. A survey by the Association of British Insurers back in 2013 found that 71% of consumers would be unhappy with insurers pricing their products based on information gathered from social media.
The FCA is launching what it describes as a “call for inputs”, from both consumers and businesses conceding that big data brings “both benefits and risks for consumers”. It has in part been sparked by insurance companies using the swathes of data they gather from loyalty schemes, smartphones and price comparison sites, such as Moneysupermarket (pictured).
The watchdog said it was aware that increased use of data could concern some consumers and affect their trust in insurance products. Big data could be improving the way insurers assess risks and price their products, the FCA said, but it will also look at whether it has a different impact on customers who are not typical.
“For example, these could be consumers with an unspent criminal conviction trying to purchase home insurance or consumers with a disability who require modified vehicles,” the regulator said.
FCA director of strategy and competition Christopher Woolard said: “We are keen to talk to both consumers and industry to understand Big Data’s impact on firms’ decisions, and in turn the effects that this is having on consumers. We will then be able to consider what further steps may need to be taken.”
In an interview with the Financial Times, Craig Skinner, insurance director at professional services firm PwC, said big data presented an opportunity for insurers to price policies more accurately, but warned there were “ethical considerations around the use of certain data that has been captured” and that “much of the information stored, and used within an insurer, is relevant to the individual and therefore needs to be handled with care”.
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