In order for everyone to benefit, the legal framework from the analog world must be adequately adapted to digital progress.
Justice and data ethics: fair, transparent, free from discrimination – and with a view to the potential
© GDV / Malte Knaack
Digital progress will accelerate and exercise growing influence on almost all areas of life. We can hardly imagine going without search engines, navigation devices and other digital aids any more. The insurance sector is no exception, one example being intelligent image recognition to speed up claims processing. These innovations benefit consumers. However, they also bring new risks: what happens with the vast data quantities accumulated within these systems? How can their security be ensured? How are decisions made by intelligent systems to be understood and corrected in case of doubt, for example because people are being systematically excluded in a digital employee selection process? Committees have addressed these issues at a national and a European level. The legislator has to adapt the legal framework from the analogue world to the digital world. Before churning out new laws and regulations, however, they should start by assessing if the current legal framework might actually be sufficient.
7 theories on consumer protection
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Theory 1: Code of conduct ensures protection of customer data
Customer data is the key resource for the core business of insurance companies. It provides the “raw material” for established business processes and the basis for developing new digital offers. However, consumers need to be able to decide for themselves who is to receive their digital data and what happens with it. For example, every vehicle owner must be able to decide whether to provide their vehicle data to an insurance company for a telematics rate. The customer has to be able to rely on security and integrity being applied to the use of their personal data. Insurers have therefore committed to a code of conduct for data processing that implements the strict requirements of the General Data Protection Regulation (GDPR).
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Theory 2: The GDPR establishes a European security standard
The General Data Protection Regulation (GDPR) sets stringent conditions for data use across Europe. It enables automated decisions to be challenged and submitted to a manual review. Other laws, for example the General Act on Equal Treatment or the law against unfair competition, protect consumers irrespective of the carrier. The current level of protection is adequate. Any more regulation could actually prevent innovation in Europe, weakening its position on the international market. That would be to the detriment of both insurers and consumers.
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Theory 3: Inconsistencies in data protection law jeopardise business models
The ePrivacy Regulation could prove a worthy addition to the current legal structure. However, its scope of application needs to be clearly defined and differentiated from the GDPR. GDPR-compliant business models cannot suddenly become inadmissible because of the ePrivacy Regulation. Subjecting the same issues to conflicting regulation creates legal grey areas, and this must be avoided. The ePrivacy Regulation therefore needs to be carefully structured.
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Theory 4: The digital information flood leads to fake transparency
Digitalisation has made competition on the insurance market more multi-faceted and intensive. Customers’ expectations of insurers stem from their online experiences elsewhere. People can contact insurers and brokers, find out about products, conclude or amend contracts or make claims much faster than before. Many consumers also use comparison platforms. However, many portals are not transparent in how they rank products or how many market participants they cover. That needs to improve in the interests of consumers.
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Theory 5: Quality not quantity is what counts for consumer information
The information glut facing consumers has increased considerably in recent years. That does not advance the politically desirable objective of tailored consumer information, however. We believe the best way for policyholders to make a decision is by reading concise information sheets provided to them in advance. The applicable framework conditions contain duplications and contradictions. The scheduled evaluations should therefore be used to harmonise current regulation.
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Theory 6: Artificial intelligence must decide fairly and without discrimination
Customers need to rely on artificial intelligence systems making fair and non-discriminatory decisions. Differentiation is not discrimination, though; this is an important distinction. Differentiation is fair as long as it doesn't lead to discrimination. Insurers have traditionally relied on algorithms for risk-based premium differentiation. The applicable legal framework also extends to the digital world. Therefore, the Federal Financial Supervisory Authority (BaFin) can review product conditions, calculation bases as well as the underlying algorithms and intervene where necessary.
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Theory 7: New technologies need social consensus
The rapid technological advances of recent years have not been purely beneficial. They have also understandably raised some concerns. That is why an open debate on the ethical use of algorithms, big data and artificial intelligence is needed. Opportunities and risks must be given equal attention. Only then will society accept new technologies.
The Positions of German Insurers in 2020
7 Topics in 7 Theories for download
- Demographic change
- Regulation
- Sustainability
- Mobility
- Digitalisation
- Consumer protection
- Career opportunities in insurance
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