The AFM presents nine points of attention for the insurance sector for the personalisation of premiums and conditions based on behaviour and data. The application of advanced data analysis for personalised insurance premiums is growing, according to a recent exploratory study by the AFM. We note that these pricing techniques offer advantages, but they could also lead to negative effects.
- Advantage: reward for safe behaviour, disadvantage: risk of uninsurability
- Points of attention to reduce risks
- Call for dialogue between all stakeholders involved
Examples are insurance policies that measure driving behaviour or lifestyle. The increasing availability of data, more advanced models and algorithms enable insurers to personalise premiums and policy conditions. Those who drive safely and have a healthy lifestyle pay a lower premium than people who take more risks.
Advantage: reward for safe behaviour, disadvantage: risk of uninsurability
Behavioural pricing can lead to safer behaviour, a lower claims burden and welfare gains. It may also prevent the exclusion of a specific group, such as taxi drivers. At the same time, advanced risk selection can lead to uninsurability and an inability to compare insurance products, especially if policy conditions are personalised as well.
Points of attention to reduce risks
We have nine points for the sector to consider in order to reduce the risks of using personalised pricing, while recognising the opportunities it presents. Examples include to not make the sharing of behavioural data mandatory, to ensure that customers can obtain insurance and to take account for the way the behaviour measured can be influenced.
Call for dialogue between all stakeholders involved
In the event of abuses, we can intervene, for example on the basis of the standards for product development. When it comes to this topic, the personal responsibility and moral compass of insurers are more important than ever. We encourage initiatives by the industry to consider this, among other things because consumer resistance is limited, and competitive pressure may overshadow the moral compass. As for ourselves, we continue to monitor developments closely and are ready to enter into dialogue with the industry and other stakeholders involved.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.