The UK's Financial Conduct Authority (FCA) has announced a review into the way general insuranceRead More
FCA to investigate UK insurance market’s use of big data
The UK's Financial Conduct Authority (FCA) has announced a review into the way general insurance firms in the country use big data analytics to improve their operations.
It has issued a call for input on the subject, with the regulator inviting both consumers and the industry to give their thoughts on how big data impacts on organisations' decision-making and the effects the technology has on customers.
The study will focus on three key questions. It will ask whether big data affects consumer outcomes, whether it fosters or constrains competition in the sector, and if the FCA's regulatory framework affects developments in the retail insurance big data market.
Christopher Woolard, director of strategy and competition at the FCA, said: "Big data is having an ever-growing social and commercial impact, and has the potential to transform practices and products across financial services. We are starting our work on big data by seeking to better understand how insurance firms are using data, and how this may evolve in the future."
He added that the review will influence the FCA's thinking when it comes to determining what steps need to be taken in future to regulate the sector.
It was noted by the Financial Times that big data has become particularly important to the insurance industry, which is able to use detailed information about their customers' behaviour to calculate more personalised premiums.
They can also take advantage of platforms like as social media to verify whether claims are fraudulent. They can, for instance, check whether two people in a seemingly random road accident are connected.
However, a 2013 study by the Association of British Insurers (ABI) suggested 71 per cent of consumers would be unhappy with insurers pricing their products based on information gathered from social media, so companies will have to tread carefully when utilising this type of data.
The ABI stated this week that insurers take care to treat personal data sensitively, adding: "Big data can make insurance work better for customers by improving the claims experience and creating personalised and innovative products."