INSURERS that trawl sites such as Facebook and Twitter to “snoop” on customers could face a crackdown by the City watchdog.
The Financial Conduct Authority (FCA) has been examining how insurers use information gathered from the internet to set premiums.
Social media sites, including Linkedin, have generated reams of personal information that financial institutions have begun to mine. However, many consumers are uneasy about their online behaviour being used to the benefit of big business.
Last week the FCA completed an initial study into how insurance companies use data from social media and other sources, such as supermarket loyalty schemes.
It could be the prelude to a broader market investigation, potentially leading to the introduction of tougher rules later this year.
The vast silos of personal information available online should help insurance companies to assess risk more accurately, experts said.
They could, for instance, tap information gathered from “smart home” devices, which enable householders to turn on their alarms, heating and lighting systems remotely. This could tell a policy writer how often residents are away from home, and therefore whether they are more likely to be the victims of burglary.
Social media platforms also offer insurers a way to uncover fraudulent claims. Last August, a former Miss England contestant was jailed for two months after lying about whiplash injuries.
Amy Laban was caught out after she tweeted a picture of herself on a mechanical rodeo bull — weeks after claiming she had suffered neck injuries in a car accident.
However, some consumers fear the consequences of insurers getting hold of information that they would have been unable to obtain in the past. For example, if a supermarket loyalty card reveals a customer loads up on alcohol and fatty foods every week, an insurer could charge him more for a life policy.
In addition to privacy concerns, the City regulator is worried that the high cost of constructing data-gathering operations could prove a barrier to entry for new insurers. This would make the sector less competitive.
Yesterday, the Association of British Insurers said “big data” could potentially transform how its members calculate the price of a range of policies, making “insurance work better for customers”.
The trade body added: “Insurers take their responsibilities very seriously, and treat personal data sensitively and securely.”
■ Tracey McDermott, the acting chief executive of the FCA, yesterday insisted that the regulator was “not going soft on the banks”.
She has been heavily criticised for dropping an inquiry into the culture, pay and behaviour of the industry.
McDermott denied the inquiry had been dropped because of government pressure. “We have objectives which are set for us by parliament and statute, and we are determined to deliver on those,” she said.