In late 2015 the Financial Conduct Authority revealed that it would be studying the use of big data in the retail general insurance sector, the regulator has now backtracked on this.
Although the FCA found that some consumers could end up missing out on insurance, it has decided that it would not be launching a full enquiry.
In July the Chartered Institute of Insurance also found that some types of cover may become completely unavailable if the consumer is deemed too risky due to the use of extensive big data.
Similarly the FCA said that there are concerns that the use of big data could make insurers charge certain customers more.
The FCA has generally been seen as a proactive regulator, particularly when it comes to the financial sector, and it has sought to not hinder innovation through the use of new technologies.
It appears to have taken the same stance with the insurance industry, although it did warn that compliance with data protection and privacy rules must be continued.
While there are concerns that the use of big data could lead to some becoming
uninsurable, the regulator found that there was currently no evidence that this was happening.
The insurance industry has been investing heavily in systems that will help it to understand customer behaviour, and therefore make insurance policies more accurate.
The rise of the ‘black box’ for in-car telematics has become widespread in the US and is becoming more common in the UK.
Christopher Woolard, the director of strategy and competition at the FCA, told the FT: “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.”
