The Centre for the Study of Financial Innovation released an interview on YouTube recently with Matthew Brewis, the FCA’s Director of Insurance And Conduct Specialists. It was a relatively high level look over the ‘insurance and regulation’ landscape, but it did spend a few minutes covering the Citizens Advice report on discriminatory pricing (around 15 min in). His remarks are worth exploring in a little detail.

He said that the CA report will raise difficult questions for some insurers. Is this a recognition perhaps that the extent to which insurers have been handling data that proxies in some way, to some extent, with ethnicity, does vary across the motor market? And that some of that variation has been of concern to the regulator? It looks like it.

He goes on to note that the CA report is about indirect discrimination, and not about insurers collecting information that they shouldn’t be. He’s right in that indirect discrimination is a factor in what the CA report addresses, but I don’t think he’s right to see it only in that light. The danger he faces is that his team, in looking into the evidence CA presents, sees it through only a partial lens. The possibility of direct discrimination happening cannot just be ruled out so arbitrarily. I don’t see the CA report doing that, so for the regulator to do so would be strange.

He then mentions talking with insurers about making sure their algorithms do not discriminate. Clearly, both CA and the FCA see algorithms as a major factor in the outcomes that CA’s research has identified, but again, there’s a danger here that his team could look at the issue through a partial lens. Algorithms are only part of the story, for they sit very firmly alongside data and practices as the three core components of data ethics.

What I didn’t hear in the interview, and this is worrying, was about how the regulator was engaging with consumer groups on this issue, particularly Citizens Advice itself. Perhaps this was not top of his mind in the midst of the interview, but then again, he did mention talking with the market several times.

I’ve been told in confidence of a number of outlying practices in the insurance market that would go unaddressed if the FCA’s line of thinking as indicated in this interview shaped their response to the CA report. That would be really unfortunate.

The way people in the market have put it to me is that outlying practices put everyone else in the market under extra competitive pressure. As I say in this analysis piece, undue pressures will have contributed to the situation that CA has found. Should the regulator not find and address these outlying practices as well as any more common practices, they risk dropping further in the market’s estimation.

In February 2019, the FCA boasted to the Treasury Committee that it had “the resources and expertise to pick inside those insurance models”. It’s time they delivered on this.

Duncan Minty
Duncan Minty
Duncan has been researching and writing about ethics in insurance for over 20 years. As a Chartered Insurance Practitioner, he combines market knowledge with a strong and independent radar on ethics.
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