Paul Evans: Insurers’ data use will shape industry’s future

Insurers’ use of data to inform underwriting decisions will shape the future of the industry, according to ABI chairman and AXA UK chief executive Paul Evans.

In his keynote speech at the ABI’s inaugural data conference this morning, Evans also warned against the danger of creating a class of uninsurable risks as insurers use data to target the most desirable business.

Evans noted that formidable volume the risk and loss data insurers have amassed over the years acts as a barrier to entry into the industry, protecting traditional insurers from disruptive new competitors. But he added that this barrier is eroding as technology advances and the number of connected deviced proliferates.

Evans said: “How we behave during the data revolution may well determine the future of our industry.

“We must remember that access to, and analysis of data will not remain unique to insurers – others will seek to harvest and commercialise the data from connected devices – car manufacturers, utility companies, companies that haven’t even been formed yet.

“We’ll no longer have an automatic right to know more about the risk profile of our customer than others, or potentially even the customer themselves, potentially losing the competitive advantage and barriers to entry we have today from this asymmetry in data knowledge.”

Trust is key

As the industry responds to these new challenges, customer trust will be key, Evans contended.

He pointed to a study by consulting firm Accenture that showed that less than a third of customer trust their insurance company.

Evans said: “In a world of mistrust, ‘Big Data’ sounds very much like ‘Big Brother’ to me, and customers need to understand why we want to access their data, what we are going to do with it, and, most importantly, what’s in it for them.”

Evans also warned of the dangers of creating a class of uninsurable risks as insurers increasingly use data to filter out undesirable business.

Responsibility

He said: “In our desire to derive a more precise risk profile of each individual customer from the data they generate, we must not lose sight of our responsibility to mutualise risks so that insurance remains affordable and accessible for all.

If we don’t, then very quickly we shall find we have lost our right to access that data – either through customer behaviour, or through Government or regulatory intervention.

He added: “Before we all get carried away by the opportunity of Big Data, we need to think about how we talk to our customers about data, and sit back and agree our moral code.”