The Financial Conduct Authority (FCA) has launched a Call for Inputs on the use of Big Data in the retail general insurance sector.
Although the use of Big Data is developing across financial services, the FCA will focus on retail general insurance as this reflects how extensively data is already used in the sector and the significance of the sector for consumers.
The organisation is also seeking views on whether its regulatory framework affects developments in Big Data or unduly constrains innovation in the interest of consumers.
“Big Data is having an ever-growing social and commercial impact, and has the potential to transform practices and products across financial services,” said Christopher Woolard, director of strategy and competition at the FCA. “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.
“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.”
The Call for Inputs asks three key questions:
– does Big Data affect consumer outcomes?
– does Big Data foster or constrain competition?
– does the FCA’s regulatory framework affect developments in Big Data in retail general insurance?
In looking at consumer outcomes, the FCA is also interested in how Big Data might affect consumers who may not be able to access standard insurance products, including those with disabilities or other vulnerabilities.
Martin Shaw, chief executive at the Association of Financial Mutuals, welcomes the research. “Big data is likely to revolutionise general insurance,” he said.
“It is increasingly the case that big insurance companies are making better use of their large data reserves to improve risk profiling, and to target more profitable customers. You can also imagine serious new entrants into the sector, such as Google and Amazon, using big data to develop interesting service propositions, lower pricing and more bespoke product features. For mutual insurers, big data is probably less important than continuing to focus on the things they do really well, such as good product design, fair claims handling and creating more meaningful long-term relationships with their customers and members.”
“What I’m hearing is that everyone is scared of Google Insurance,” said Shaun Tarbuck, CEO of the International Co-operative and Mutual Insurance Federation (ICMIF), in an interview with Co-operative News in October.
But while they are already licensed in the US, he thinks Google will struggle in Europe because of the Data Protection Act. “Google is, without a doubt, a danger, but they are not going to go after the affinity groups, the co-ops, initially,” he added. “How much data has Google got on your customers? How much have you got on your customers? It’s actually about the same. We just need to work faster and smarter with the digital information we have on our customers, to make sure they are aware of what we do for them.”
Following the consultation, the FCA says its next steps may include a market study, adjustments to policy or guidance, or another form of intervention. The organisation will publish a Feedback Statement mid-2016.
- Comments to the FCA must be submitted by post, email or through the online form by 8 January 2016. The full Call for Inputs and further information can be found at www.fca.org.uk/news/call-for-inputs-big-data