In November
2015, the Financial Conduct Authority (FCA) announced that it would investigate
the use of big data in general insurance (GI), focusing on private motor and
home insurance, and would seek input from industry stakeholders and experts. As
an insurtech specialist in the GI sector, RDT provided a written response to
questions on data usage – and was the only technology company that the FCA
named as a contributor.
The FCA’s
questions covered data sources, data accuracy, and how the growing use of
digital information might impact consumers and businesses. The aim was to see
if big data would foster or constrain competition, whether some consumers might
be marginalised because of an increasingly granular approach to underwriting,
and whether the regulatory framework needs adjusting in light of advances in
technology.
With the
help of RDT’s insights, the FCA has concluded that big data is more friend than
foe. In its Feedback Statement, published on 21 September, it said that big
data is “producing a range of benefits for consumers in motor and home
insurance, by transforming how consumers deal with retail GI firms, encouraging
more innovation in products and services and streamlining parts of the customer
journey.” The FCA said that because the use of data by insurance firms is
“broadly working well”, it would not launch an in-depth market study.
RDT
highlighted that although there are currently a limited number of organisations
providing enriched data, it’s a growing field and means that as companies
realise the value of the data they hold they’ll make it available to insurers.
This data enables
insurers to rate more accurately, and those with the latest technologies, such
as RDT’s Equator, can enrich at point of quote. This is positive for the
industry and positive for consumers, since accuracy is in everyone’s
interests.
If there is
a cautionary note, says the FCA, it’s that big data might lead to ‘risk
segmentation’ because consumers with higher risks might be unable to find
affordable insurance. However, there is no evidence of this to date.
The FCA’s
Feedback Statement is an endorsement of the role that big data can play in
improving the underwriting and claims process, and it underlines the value of
RDT in helping insurers to reap the benefits of insurtech.
If you want
to know more about how RDT’s technology can help your company enrich at the
point of quote, contact us at info@rdt.co.uk
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