The European Union has launched a consultation on the usage of big data among businesses, to decide if it warrants ‘further regulatory or supervisory actions’.
Currently big data and analytics falls under data protection, competition and consumer protection laws, which companies managing EU consumers’ data are required comply with. However, the exponential growth in big data application, granularity, and usage (a predicted 44 zettabytes by 2020) has caused EU regulators to have a rethink.
According to Techcrunch, the remit also includes looking at predictive, descriptive or prescriptive analytics. There may also be analysis of the impact of aggregating data that comes in from users’ wearables and IoT devices.
Algorithms under the spotlight
The consultation concerns financial firms; specifically those which operate in the banking, insurance and financial markets. Regulators want to explore whether customer data is being, or has the potential to be, used to classify EU citizens as ‘undesirable’ customers. The aim is to work out if current rules are appropriate, identify where there are gaps, and whether they need extra ‘regulatory or supervisory’ actions.
“For example, consumers seeking household insurance for properties located in areas exposed to high risks such as floods, earthquakes or crime may have to pay very high premiums or might not be offered an insurance coverage,” they said in a statement.
The intention is also to investigate and understand the benefits, in terms of cost, effectiveness, and suitability. “Big Data may lead to better and more informed decisions, more efficient processes and more appropriate services.”
The Admiral case
It’s clear that the growth in big data has exceeded EU regulators’ ability to keep up, so a review could well be what the industry needs in order to progress.
For an example of data-led innovation being reined in, look no further than the Admiral and Facebook case. In November Admiral were blocked from crawling potential customers’ Facebook profiles to set insurance premiums. The car insurance company had planned to use software to assess potential customers’ ‘risk’ by looking at statuses posted and interactions such as Likes. Hours before the technology was to be launched, Facebook pulled the plug, saying that this would be a contravention of its privacy policies:
“Protecting the privacy of the people on Facebook is of utmost importance to us. We have clear guidelines that prevent information being obtained from Facebook from being used to make decisions about eligibility”.
Wait and see approach
As for the EU initiative, there’s no word on whether the consultation will be expanded to other sectors. For example in retail, stores are using data to predict times of high demand, predict buying patterns, and gather deeper insight via loyalty cards. However, these innovations are arguably more geared towards heightening or evolving the customer experience. Whereas in finance, regulators want to see how the data is being applied and whether this will have a negative impact.
You can view the discussion paper at https://www.esma.europa.eu/sites/default/files/library/jc-2016-86_discussion_paper_big_data.pdf. The EU will publish their decision in the spring of 2017, following the three-month consultation.