FCA CEO Andrew Bailey illustrates big data limits for insurers

The increasing use of big data in the insurance industry requires a framework which clarifies the limits, according to UK’s regulator Financial Conduct Authority.

Big data is allowing insurers to refine their risk assessment of clients, but the FCA is preparing to step in if carriers exploit vulnerable individuals or cross certain boundaries which conflict with public policy.

The use of telematics in motor insurance for example allows for an individual assessment of a cover holder’s driving behaviour and for a tailored pricing. In a similar way, health insurers are increasingly taking cover holders’ behaviour into account for policy pricing.

Big data allows insurers to move the boundary between risk assessment based on aggregate model behaviour towards risk assessment based on