IAIS Publishes Draft Paper on Use of Big Data Analytics in Insurance
IAIS is seeking feedback on the draft Issues Paper on the use of big data analytics in insurance. The paper focuses on the use of algorithms and advanced analytics capabilities by insurers to make decisions based on patterns, trends, and linkages and examines the availability of new alternative data sources (collectively referred to as big data analytics) to insurers. The paper builds on the IAIS Issues Paper (published in November 2018) on the increasing digitalization in insurance and the potential impact of this digitalization on consumer outcomes by focusing more on issues related to the use of personal and other data by insurers. Feedback on this consultative document is invited by October 16, 2019.
To help understand the potential benefits and risks to consumers associated with the use of big data analytics by insurers, the paper considers the manner in which insurers are now able to collect, process, and use data across various stages of the insurance product lifecycle, namely product design, marketing, sales and distribution, pricing and underwriting, and claims handling. The paper also makes certain observations about the potential implications of the use of big data analytics in insurance, for supervisors. Furthermore, in light of the outcomes for the fair treatment of customers described in the Insurance Core Principles (ICPs) 18 and 19, this paper makes certain observations about the potential implications for supervisors as a result of the use of big data analytics in insurance.
The paper observes that the increased availability of data and enhanced processing capabilities now accessible to insurers can result in a number of benefits. On the other hand, the paper also highlights that the complexity and opacity of algorithm technology and the ability of insurers to customize product offerings to an individual level could potentially result in risks to individual customers as well as to the insurance sector, for which supervisors may need to devise appropriate responses. Additionally, the paper suggests that supervisors think about whether there is a need to enhance governance, oversight, and third-party risk management requirements specific to the use of algorithms for big data analytics purposes.
Comment Due Date: October 16, 2019
Keywords: International, Insurance, BDA, Big Data, ICPs, Suptech, Insurtech, IAIS
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