Big data in insurance contracts - a tool for good, or bad?

Big data is changing the way many companies conduct business on a day-to-day basis. Insurers are notorious for utilising data in the risk assessment of prospective and current policyholders. The use of such risk assessment mechanisms in insurance has resulted in some discrimination between various policyholders but this has been held to be justifiable due to the fact that it is based on actuarial science and is therefore viewed as fair. However, the advent of big data, data analytics, algorithms, and artificial intelligence is providing insurers with far more sophisticated data about potential policyholders. This may prove to be beneficial to insurers in many ways, but it also brings about additional possibilities of exclusion within the industry. This use of big data has the potential to increase social injustices within our country, which is something that needs to be avoided as much as possible. Discrimination, through the use of big data, is a reality that needs to be addressed by insurers and regulators alike. Achieving social justice as far as possible in the insurance industry is crucial and also requires considerations in the areas of morality and ethics. The reason for this is that the very nature of big data is integrally linked to the assessment of the policyholder's moral risks and hazards for the benefit of the insurer is often linked to personal circumstances and, sometimes, the financial circumstances of the policyholder, and may even speak to the policyholder's integrity. Although potentially beneficial for the insurers from a risk assessment perspective, the use of big data has ethical and moral considerations within the insurance context. After all, the insurance industry's collection, storage, and use of big data raises ethical and moral concerns and casts a shadow on the manner it is used to assess policyholders. This discussion highlights the need for regulatory oversight of big data, an aspect that is notably missing in the South African legislative framework.