As the New Year lurks off stage, waiting to burst into the global spotlight, I sit down and wonder about the cast of characters that it will bring with it.
What isn’t going to happen
Here’s my list of things that won’t happen next year:
Yup, the cost of insurance is going up again in 2018. There are a few reasons for that, to which I will point below, but the pundits who are calling for a fall in the cost of insurance of up to 10% are being a little optimistic.
Ogden and Civil Justice reform
Let’s start with Ogden reform and Civil Liability reform. Let’s be clear, in a year when ALL that we are going to be interested in is Brexit, there is not a hope of anything as macro-economically unimportant as whiplash appearing on the agenda. And even if it does, the pressure to keep a stable majority together in Parliament means that no one is going to take a risk. While it may benefit voters to pay less for insurance, those voters are going to be distracted by Brexit, a royal birth and a royal wedding in the first half of the year. The bottom line is that there is no political capital to be gained by forcing through these reforms. There is, on the other hand, a lot of political capital to be lost; so it’s better to bury the whole thing in committees and send it back to departments for guidance and advice.
Call me a cynic, but put my prediction in your desk drawer and see if I am right this time next year.
“The bottom line is that there is no political capital to be gained by forcing through these reforms.”
Turning to the issue of what WILL happen next year. On the 25th May 2018, GDPR rules will come into effect. They are already law — they just become effective on that date.
So what? I hear you ask. Well, the insurance industry has been gorging itself at the trough of big data for several years, getting access to anything it can in order gain a rating advantage over the next guy. We have moved from insurance being an art to it being a science; a science increasingly populated by people who use complex algorithms and artificial intelligence to find new avenues of opportunity.
What if consumers took their data away? What if regulators took their data away? How would the industry react?
There is little or no doubt in my mind that the entire industry has undercooked GDPR on its’ risk radar, but that is not really my issue. I think the entire industry has also undercooked the opportunity of GDPR. Research we carried out this year shows that if consumers believe there is a value to them of sharing data, and if they think you will keep that data safe, they will be happy to share more of it with you.
The problem is that after 25th May 2018 this opportunity disappears, and all that is left is a hangover and a nasty taste in your mouth.
The unforeseen issue I see here is not the regulator. I think the ICO will take a pragmatic approach to enforcement. Although they might be looking to name and shame a few high-profile scalps initially, they won’t be looking to put them out of business. The biggest problem this will cause is that the moment they intervene with a company, that company will have to stop whatever it was doing with data. If that was risk based pricing, well, it might destroy the entire pricing model. Maybe.
“Can we say GDPR and CMC in the same sentence? Yes, I think we can. Where there’s muck there’s brass.”
No, the ICO is not the problem. The problem is the follow-on private claims. Article 82(1) of the legislation gives individuals who have received material or non-material damage the right to bring claims.
Remember the Claims Management Companies the industry has been thumping the table about? Can we say GDPR and CMC in the same sentence? Yes, I think we can. Where there’s muck there’s brass. There’s a lot of mucky data out there.