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Digitalisation











          The consultation paper proposed changes relating to the following topic areas:                                           Big Data and automation in financial advice         EIOPA has also identified some risks that can arise
                                                                                                                                                                                       if firms do not have in place adequate governance
          -      Illustrations of what the retail investor might receive in return from their investment (performance scenarios:   Background                                          arrangements. Such risks, which are not new, but
          future performance scenarios, the inclusion of past performance, …);                                                                                                         their significance is amplified when using BDA, are:
          -      Information on what the costs of the investment are;                                                              Big Data is defined by the Joint Committee of the European
          -      Specific issues for different types of investment funds (in particular the case of UCITs and relevant non-UCIT    Supervisory  Authorities  (ESAs:  EIOPA,  ESMA  and  EBA)  as   -   Ethical issues linked with fairness of BDA
          funds);                                                                                                                  “situations  where  high  volumes  of  different  types  of  data   use and the principles for responsible behaviour in
          -      Specific  issues  for  PRIIPs  offering  a  range  of  options  for  investment  (so-called  “Multi-Option  Products”  or   produced with high velocity from a high number of various   a digital age.
          “MOPs”).                                                                                                                 types of sources are processed, often in real time, by IT tools   -  Other  issues  linked  to  accuracy,
                                                                                                                                   (powerful  processors,  software  and  algorithms)”.  EIOPA   transparency, auditability, and explainability of
          BIPAR responded to the consultation, stating that the legislators and supervisors should take the time to carry out a    launched in June 2018 an EU-wide thematic review on the use   certain  tools  such  as  artificial  intelligence  and
          proper review of the elements which have shown to be incorrect.  In the meantime, the KIDs (or elements of the KIDs)     of  Big  Data  by  insurance  undertakings  and  intermediaries.   machine  learning.  For  example,  certain  outputs
          that are considered to be misleading should be removed by the supervisory authorities.  The sector needs regulatory      This review came as a follow up to the ESAs cross-sectorial   reached by “black box” algorithms cannot be
          stability. Frequent changes or “clarifications” to legal texts do not help creating trust and confidence by consumers and   review of the use of Big Data by financial institutions published   adequately  explained  raising  questions  about  the
          are very costly to the entire economy.                                                                                   in March 2018.                                      accountability of those firms using them.
                                                                                                                                                                                       -      GDPR-related issues; it is questionable
          As part of the review, the European Commission, in cooperation with the ESAs, also undertook a consumer testing          In May 2019, EIOPA published its Thematic Review on the use   whether consumers are fully aware of how their
          exercise  to  assess  the  effectiveness  /  retail  investors’  preferred  option  regarding  performance  scenarios  and  past   of Big Data Analytics (BDA) by insurance firms and insurance   personal data is being used when they accept the
          performance information within the PRIIPs KID. The results were published on 27 February 2020.                           intermediaries focused on motor and health insurance. The   terms and conditions of their insurance policy
                                                                                                                                   review revealed a strong trend towards increasingly data-  and also how firms can explain to consumers in a
                                                                                                                                   driven  business  models  throughout  the  insurance  value   meaningful way the functioning of BDA tools in the
          Next steps                                                                                                               chain                                               context of “black box” algorithms, when complying
                                                                                                                                                                                       with GDPR requirements.
          The ESAs intended to conclude their review around the end of the first quarter of 2020 and submit their final proposals   According  to  EIOPA,  there  are  many  opportunities  arising   -   Issues  linked  to  personal  data  and
          to the European Commission shortly afterwards. This has not yet been done.                                               from BDA, both for the insurance industry and consumers:  consumer protection regulations when the
                                                                                                                                                                                       information is stored on the cloud. Also, an excessive
          The European Commission’s wider review of the PRIIPs Regulation (level 1) will also look at the interaction with other   -       The combination of traditional and new sources   concentration in the number of providers in certain
          recent new information requirements such as in IDD and MiFID II, how they work together and if the interplay can be      provides greater granularity and frequency of information   strategic services/technologies can potentially
          improved.                                                                                                                about consumer’s characteristics, behaviour and lifestyles.   disrupt  the  efficient  functioning  of  value  chains,
                                                                                                                                   This enables the development of increasingly tailored   leading to situations of “reverse outsourcing”.
          The Commission is expected to soon launch a study to bring all of this together.                                         products  and  services,  more  accurate  risk  assessments,
                                                                                                                                   speed in decision making and subsequently less operations   EIOPA’s work on digital ethics in insurance
                                                                                                                                   costs.                                              In 2019-2020 EIOPA conducted further work on
                                                                                                                                   -       BDA tools such as artificial intelligence and machine   ethical issues with the fairness of the use of BDA,
                                                                                                                                   learning are commonly used by insurance undertakings   as well as regarding the accuracy, transparency,
                                                                                                                                   rather than by insurance intermediaries, primarily on   auditability, and explainability of certain BDA tools,
                                                                                                                                   pricing, underwriting and claims management.        such as artificial intelligence and machine learning in
                                                                                                                                   -       The use of cloud computing services is increasingly   collaboration with the industry, academia, consumer
                                                                                                                                   widespread, enabling implementation of BDA solutions.  associations  and  other  relevant  stakeholders.
                                                                                                                                   Uptake  of  usage-based  insurance  products  will  gradually   EIOPA also continues its ongoing work in the area of
                                                                                                                                   continue in the following years, influenced by developments   cyber insurance and cyber security risks (see under
                                                                                                                                   such as connected cars, health wearable devices (Internet of   Cybersecurity for more information).
                                                                                                                                   Things -IoT) or the introduction of 5G mobile technology. This
                                                                                                                                   can help consumers to obtain a more accurate calculation   As a follow-up of this thematic review, EIOPA
                                                                                                                                   of their insurance premium. Robo advisors and specially   established in September 2019 its Consultative
                                                                                                                                   chatbots are also gaining momentum.                 Expert Group on Digital Ethics in Insurance. The
                                                                                                                                                                                       objective of this Group of experts is to assist EIOPA



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