The UK’s Financial Conduct Authority (FCA) will “further engage” with the retail general insurance sector after questions about Big Data use uncovered potential areas in which consumers may be disadvantaged.

The FCA says Big Data is producing broadly positive outcomes but it may also affect pricing practices and leave some people worse off.

The regulator does not plan to pursue a full-scale inquiry, because concerns raised are not showing up in practice, but it will keep an eye on developments.

“There is potential for Big Data to transform practices across general insurance markets, and some consumers are already seeing benefits, but there are also some risks to consumer outcomes,” Director of Strategy and Competition Christopher Woolard says.

“While we have decided not to launch a full market study, we are undertaking further work in this area, and with the Information Commissioner’s Office, to ensure our rules and policies keep pace with developments in the market but also do not prevent positive innovations.”

The FCA said in a discussion paper released last November it wanted to better understand the use of data by retail general insurance businesses, and potential impacts, before considering further steps.

Responses to the paper suggested increased risk segmentation could make it harder for some customers to obtain insurance, while Big Data might also lead to greater use of reasons other than risk and cost in setting prices.

The FCA now says: “To assess how different pricing factors are used, we will start a piece of work to look at pricing practices in a limited number of firms in the retail general insurance sector later this year.”

The regulator will also co-host a roundtable with the Information Commissioner’s Office on data protection and data use in insurance, with relevant stakeholders participating.

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