City watchdog the Financial Conduct Authority has shied away from a full inquiry into the use of big data by the insurance industry despite admitting it is concerned that certain consumers could end up paying more.
The regulator started gathering evidence on the use of big data in the market in November last year. It was triggered by growing concerns that some insurers were trawling social media, loyalty schemes, and price comparison sites, like GoCompare (pictured), to gather detailed information on policyholders.
However, the FCA has decided the use of big data by general insurers is “broadly positive”, and could find no evidence that companies were withholding cover from high-risk customers.
Despite ruling out a full market study – which was one possible outcome of its review – the watchdog did say that it would remain alert to the issue and that it would have no hesitation in reporting to the Government if its concerns grew.
FCA director of strategy and competition Christopher Woolard said: “The general insurance sector is vitally important, impacting millions of consumers so it’s important that the market works well.
“There is potential for big data to transform practices across general insurance markets, and some consumers are already seeing benefits but there are also some risks to consumer outcomes.
“While we have decided not to launch a full market study, we are undertaking further work in this area and with the Information Commissioner’s Office to ensure our rules and policies keep pace with developments in the market, but also do not prevent positive innovations.”
Despite some cynics claiming there is no such thing as big data in the first place, the latest estimates show spending on data technology and services will reach $48.6bn (£32bn) within four years, growing at a compound annual growth rate (CAGR) of 23.1%.
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