New technology means some people will become uninsurable – and society needs to decide what to do about it, according to a new report from the Institute of Chartered Accountants in England and Wales (ICAEW).
ICAEW said the ability to collect and use highly personalised data could mean factors like genetics, how active people are or whether they need to drive at night means insurance products could become unaffordable – or insurers may refuse to take on certain risks.
According to ICAEW’s report, Audit insights: insurance, based on experience of a range of audit firms with clients across the insurance industry, this pointed out that insurers can no longer assume that they have the best data on their customers.
In terms of health and life insurance, ICAEW notes that some companies are offering incentives to customers who provide them with more data. For example, policy holders who use wearable devices like Fitbits or apps to share information about their health and activity, may be offered lower premiums.
Philippa Kelly, ICAEW financial services assurance manager said: "This can make insurance products more precise and so potentially better value for customers. However, if such data sharing became a condition of getting a policy, we would need to be careful about who is being unfairly disadvantaged."
Kelly added: "Insurance protects us against risks we face in everyday life but can’t necessarily bear the cost of alone. It depends on groups of people being exposed to similar risks and seeking similar cover. Increasingly, technology means there is so much data about our own individual risk factors that it no longer makes sense for companies to group us together.
"But this means some people may be so high risk they are priced out of insurance altogether and we get ‘uninsurables’. This can easily be due to factors people can’t control. These might be to do with where you live, genetic conditions or new developments like cyber risk. Society needs to decide what we do about that."