The insurance industry risks sparking a regulatory crackdown unless it takes “great care” to ensure its increasing use of personal data does not leave chunks of society without affordable cover, the head of Britain’s main industry body has warned.
Paul Evans, chairman of the Association of British Insurers, said the sector is locked in a data-gathering “arms race” as they seek ever more information to help predict whether individual policyholders are likely to put in claims.
New “big data” techniques include monitoring driver behaviour through “telematics”— data recorders fitted in cars — and assessing fiscal responsibility by scrutinising bank accounts and bill payments.
Insurance companies insist this analysis allows them offer some customers better deals and is not aimed at disadvantaging those deemed more likely to claim.
But Mr Evans acknowledged that ultimately the trend was likely to mean “higher risk customers will see higher prices”.
“The industry will have to take great care to ensure we’re not creating, because of big data, sectors of society that can’t buy insurance,” said Mr Evans, who is also chief executive of Axa UK.
The ABI chairman added the industry should “anticipate regulators” by developing its own code of conduct on how to use data responsibly. “Let’s ensure we don’t fall into any pitfalls,” he added.
The European insurance industry is already lobbying against EU-wide data protection rules being drawn up in Brussels.
The EU rules are not designed to clamp down specifically on insurers’ use of data. However, the industry is unhappy that the proposals would allow policyholders to demand that their information be removed from insurers’ databases.
Insurance Europe, the trade body, last week raised a series of concerns about the data rules, warning they would make it harder for insurers to fight fraud. Unless it is changed, the group said, the proposals “will likely result in higher premiums for honest policyholders.”
Mr Evans said more individualised policy pricing could be considered fair if it meant “those who are better behaved [such as safer drivers] are no longer subsidising those who are not”. However, he said he would be concerned if individuals were unable to buy insurance because of factors outside their control.
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