Using Big Data to price risk could lead to consumer exploitation, the UK’s Financial Conduct Authority (FCA) warns.

Big Data can provide information on consumer buying habits, giving insurers an avenue to direct lower premiums to those who tend to shop around for the best deals.

The FCA says some consumers base their purchases on more than just price, and should not be penalised for it.

“There may be many reasons why a customer chooses to stay with a particular provider, but Big Data could be used to identify customers more likely to be inert, and insurers could use that information to differentiate pricing between those who shop around and those who do not,” CEO Andrew Bailey said.

“The latter pay more and thereby can cross-subsidise those who do shop around.”

Mr Bailey says there is a “choice for society – do we permit this sort of behaviour to go on, or not? To simplify, our view is that we should not.

“The reason is because some of the public act on the basis of ignorance or naivety, which should not be exploited, or because some of the consumers involved are more vulnerable and cannot reasonably be expected to act in a way that prevents the exploitation of the information on their behaviours.”