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Protection industry warns on FCA big data comments

Protection industry warns on FCA big data comments

Life and protection specialists have urged the Financial Conduct Authority not to throw the telematics baby out with the bathwater.

Telematics is the integrated use of telecommunications and information technology for application in vehicles, and with control of vehicles on the move .

While the City watchdog expressed concern over its use in general insurance, using so-called 'big data' to provide more tailored underwriting for life and healthcare policies can be helpful, Phil Jeynes, head of sales and marketing for UnderwriteMe, has said.

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It was last week that the Financial Conduct Authority (FCA) published a feedback statement on big data.

In its latest feedback statement, the regulator said it had found "broadly positive consumer outcomes resulted from the use of big data", such as in the development of new products or making the claims process more streamlined.

However, it identified two big areas of risk.

The FCA stated: "The use of Big Data has the potential to leave some consumers worse off.  Big data changes the extent of risk segmentation so that categories of customers may find it harder to obtain insurance.

"The FCA is also concerned about the potential big data might enhance firms’ ability to identify opportunities to charge certain customers more."

The FCA has also decided not to launch a market study into this at the present time. 

Mr Jeynes said: "I think the big data issue, particularly when related to telematics, is a complex one. At the moment, some insurers have begun using data from their clients to reward them for healthy activities, like going to the gym or walking a number of steps.

"There is no downside to the client for this: it is all carrot and no stick."

The use of telematics for the life insurance industry has been described as pay-as-you-live (PAYL) insurance, and early forms of this have been adopted by some insurance companies already, such as Vitality Life.

Vitality has been collating such data to incentivise wellness and wellbeing among consumers for 10 years, and believes consumers will become comfortable with data sharing, particularly if doing so leads to positive rewards, such as cinema tickets and other services. 

Vitality refers to PAYL Insurance as the ‘shared value model’, which earlier this year, Tom Davis, head of research and development for Vitality, told FTAdviser was: “trying to find a way to create value for the insurer, the insured and for advisers in the system."

Commenting on the FCA's concerns over telematics, which it issued as part of a feedback statement on the use of big data in general insurance, Guy Williams, director at Liss Systems, said the proliferation of big data, combined with sophisticated analytics tools and digital technology, means there is potentially greater access to a more granular view of a given risk when it comes to underwriting.