Insurance Europe has responded to a European Supervisory Authority (ESAs) consultation on a joint discussion paper on the use of big data analytics by financial institutions.
Insurance Europe shares the ESAs’ view that technological innovations are changing people’s lives faster than ever before. Yet, big data analytics and the use of predictive modelling are not new concepts in insurance. Actuaries already analyse large sets of data to identify correlations and predict future events, such as mortality tables to price life insurance products.
In its response, Insurance Europe said that with technological advances, the wealth of data and computing power is changing, which, in combination with advanced data mining and analytics tools, enable insurers to adopt new business approaches and products, enhancing existing internal models, processes and services. The use of these tools in insurance is still in its infancy and it is difficult to predict which specific innovative uses of data will prove successful and how widespread their adaptation will become in the market.
Insurance Europe said that improvements in risk assessment due to the use of big data will offer clear benefits to consumers, including more accurate risk pricing and increasingly affordable products for many consumers. While in some circumstances, more accurate pricing could result in an increase in risk segmentation, so far there is no sign that insurance might become unaffordable for certain groups of policyholders. Rather, insurers have every incentive to offer attractive insurance products for all segments of the population.
Insurance Europe encourages the ESAs to keep monitoring the developments in the area of big data analytics and continue the dialogue with all stakeholders, including the insurance industry. Insurance Europe believes that the identified risks can be adequately addressed by the existing legislation.