New technology means some people will become uninsurable – and society needs to decide what to do about it, according to a new report from ICAEW.

The ability to collect and use highly personalised data could mean factors like genetics, how active you are or whether you need to drive at night means insurance products could become unaffordable - or insurers may refuse to take on certain risks. Audit insights: insurance, based on experience of a range of audit firms with clients across the insurance industry, also points out that insurers can no longer assume that they have the best data on their customers.

Philippa Kelly, ICAEW Financial Services Assurance Manager said: “Insurance protects us against risks we face in everyday life but can’t necessarily bear the cost alone. It depends on groups of people being exposed to similar risks and seeking similar cover. Increasingly, technology means there is so much data about our own individual risk factors that it no longer makes sense for companies to group us together.

“But this means some people may be so high risk they are priced out of insurance altogether and we get ‘uninsurables’. This can easily be due to factors people can’t control. These might be to do with where you live, genetic conditions or new developments like cyber risk. Society needs to decide what we do about that. With terrorism risk in major cities or the natural disasters, the government stepped in so insurance is still available to people who need it. Should the government intervene to ensure insurance remains accessible even to people who represent a higher risk?”

For products like health and life insurance some companies are offering incentives to customers who provide them with more data. For example, policy holders who use wearable devices like Fitbits or apps to share information about their health and activity, may be offered lower premiums.

Philippa said: “This can make insurance products more precise and so potentially better value for customers. However, if such data sharing became a condition of getting a policy, we would need to be careful about who is being unfairly disadvantaged.”

Governments in the UAE, Qatar and Saudi Arabia have recently enacted legislation requiring all employers to provide health insurance cover for their employees (and in some cases dependents).  This means that insurance cover is now a live issue for many businesses across the region.

Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said: “In the case of many of the GCC countries, where we have compulsory health insurance in place, the cost of insurance has been shifted to employers. They could indeed start using things like fitness trackers in the hopes of lower premiums. But this in turn raises concerns over how much information employees are expected to share, and whether those that prefer not to could lose out.

As well as helping insurers, technology is also enabling consumers to cut out the “middle man” entirely by doing their own research online rather than relying on brokers. This can make the process cheaper, but customers have to rely on their own knowledge and experience to decide what is best for them.

Philippa said: “Websites mean it is easy and free to compare prices so customers think they are getting a good deal. But simplified information means that customers might miss important details and not get the value they expect. People might pay too much, by over-estimating the value of their property, or not get the cover they want if the customer does not understand what is and is not protected. The problem is that most people only find out when it is too late and their insurer can’t pay out.”