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The University of Southampton
Insurance Law Research Group

ILRG written submissions on insurance and big data

Published: 3 September 2015

Members of the Insurance Law Research Group have submitted observations to the Commons Select Committee on Science & Technology: ‘The Big Data Dilemma’.

The Commons Select Committee on Science and Technology inquiry examines the opportunities and risks of 'big data'. 'Big data' refers to ways of handling data sets so large, dynamic and complex that traditional techniques are insufficient to analyse their content. The inquiry looks at whether the Government is doing enough to ensure that UK entrepreneurs can benefit from the data revolution, while looking at issues around data protection and privacy.

Professor James Davey and Mateusz Bek proposed in their written submission that the issues raised by big data be investigated and monitored, rather than met with immediate State action.

The written submission noted as threats the potential reduction in the current redistributive effects of insurance, by which the fortunate subsidise the unfortunate. This builds on recent significant research from the United States by Siegelman and Swedloff. ‘Risk based pricing’ brings not only the promise of more efficient contracting, but risks of extending the class of ‘the uninsured and uninsurable’; and the potential for access for insurers to gain access to data currently considered private or personal - should an insurer have routine access to customers’ internet browsing history or supermarket loyalty card records? There is a need for ongoing revision of the extent to which insurance law and regulation controls the use of sensitive information.

The conclusion of the authors was that the role of information in the sensitive equilibrium in insurance markets, and the influence it has on the role of insurers, the State and customers makes ‘big data’ a clear insurance issue. It is likely to arise slowly - perhaps with the growth of ‘black boxes’ in cars to monitor driving patterns and improved detection of suspicious claims. However, the extended use of data might diminish the real strength of insurance to provide cover across communities, whereby the lucky subsidise the unlucky, often without even realising that they are doing so. Whilst the redistributive effects of insurance might only be of tangential interest to insurers and those interested in markets, it has a social significance that ought not to be overlooked.

The full written submission can be accessed through the ILRG publications feed.

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