Emergence of big data: how will it impact the economic model of insurance?

Improved knowledge of one’s clients, new pricing models based on greater risk segmentation, the recent wave of connected objects which paves the way for new personalised services, etc.; the exact contours of the “big data” phenomenon and its potential consequences may appear fuzzy and definitions differ from one person to another. However, there is a unanimously shared feeling that this technological revolution will not spare the insurance sector, and that in a few years business models will probably be widely different to what they have been in the past. This perception is often associated with the prospect of a demutualisation, resulting from the differentiation to an extreme degree of insurance offers and prices from one person to another. While the development of new technologies and the exacerbation of competitive pressures could actually result in much finer segmentations than what is now the case, this fear must however be put into perspective. Besides the regulatory constraints that are present and do not appear to be on the decline, an extreme segmentation would go against the very interests of insurers, creating excess risk and profit volatility. Structural changes will also arise from the new types of relationships between insurers and their policyholders (when taking out a policy and, even more so, throughout the life of the insurance contract). In the longer term, the changes in the actual underlying risks could constitute structural breaking points of economic insurance models. The announced development of the driverless car is a perfect example. In this context, access to data will be of decisive importance and may eventually have an impact on financial stability. It therefore seems essential to define clear rules for accessing these data, based on self-determination and individual freedom of choice.