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 please contact us.