The insurance arm of Barclays says it has found a legal way to assess potential customers' bank records.
London Observer | July 10, 2005
By Jill Insley
The general insurance division of one of Britain's biggest banks believes it has 'found a way round' the data Protection Act enabling it to use customers' banking details to underwrite insurance policies.
Barclays Insurance intends to 'score' potential customers according to their banking records. The insurer says those with poor scores - perhaps because they have missed bill payments or are constantly in the red - are more likely to make claims than richer customers with good banking records. Clients with very poor scores may be charged more or not be offered cover at all, enabling the insurer to offer cheaper premiums to richer clients with better scores.
Adrian Grace, the managing director, told Cash he thinks the company will be able to start using the customers' banking information as soon as September or October.
'Affluence underwriting', as insurance credit scoring is often called, is common in the US. One American insurer, Progressive Direct, says it has found credit history 'to be predictive of future accidents, which is why we, and most insurers, use this information to help develop more accurate rates'.
Progressive says customers who consistently pay all their bills on time, who have a long-established credit history and use little of their available credit would earn a good score. But those making numerous late loan and bill payments and taking much advantage of their available credit would get a poor one.
In the UK, insurance companies have so far assessed people's wealth through factors such as their post codes. But until now they have not been able to use personal banking information for underwriting.
Such data could be particularly useful in urban areas such as London, where the very poor live cheek by jowl with the rich, and therefore share the same postcodes.
Adrian Webb, a spokesman for Esure, part of the HBoS group, said insurers may only use the information to assess whether potential customers could afford to pay the monthly instalments on a policy.
'In the UK, insurers gather many pieces of information to assess insurance risk. But these are always relevant to that risk, such as the car, the postcode and the claims history.
'An insurer might consult a credit score to verify a customer isn't at risk of defaulting on instalment payments - but not to assess their insurance risk,' Webb added.
A spokesman for the Information Commissioner, Richard Thomas, the government regulator whose department upholds the Data Protection Act, said: 'It's difficult for us to comment without knowing the full details of this case, but clearly we take the issue of protecting people's personal information very seriously and will be looking into it.'
The Financial Services Authority is not worried by the move. Spokesman Rob McIvor pointed out that bank customers usually sign agreements to allow their data to be distributed between different parts of a financial organisation.
'As long as they're not doing anything illegal and not breaking a customer's confidence, it's not something that we as the regulator should be concerned about,' McIvor added.
But a spokeswoman for HSBC bank said: 'Certain parts of the organisation would need access to customers' banking data - the branches and call centres for example - but it is fairly restricted.'
Barclays Insurance sells car, house and travel policies under its own brand name but which are underwritten by Norwich Union.