While online re/insurance platforms entail many benefits with regard to market transparency, transaction costs and information asymmetries, they may also pose significant challenges to consumer protection and levels of competition, according to the Geneva Association (GA).
A recent report by the international think tank, titled ‘Virtual Competition: Online Platforms, Consumer Outcomes and Competition in Insurance’, argued that policymakers should address how these platforms use the personal data they collect about users.
In addition to raising concerns about intrusiveness, fairness and discrimination, the use of this data could act as a potential barrier to market entry when assessing market power and lead to potential anti-competitive conduct, the GA suggested.
“Data collected by online platforms may be a source of competitive advantage over traditional firms,” said Benno Keller, Special Advisor of the GA and lead author of the study. “This could lead to the emergence of dominant platforms that act as gatekeepers to their users.”
The report added that over-simplification and biased information on online platforms could generate search results, rankings, and other information that does not necessarily reflect individual user preferences.
However, the GA also noted that some of these risks may be outweighed by the transparency offered by online platforms, which can help consumers overcome behavioural biases and allow them to better compare complex products and find those best-suited to their needs.
“The need to reassess trade-offs between benefits and risks raises important policy questions,” said Anna Maria D’Hulster, Secretary General of GA.
“For example, on the responsibilities and rights of consumers regarding the purchase of insurance, or whether online platforms should be subject to regulatory transparency and fairness requirements similar to those advanced in the European Union,” she explained.
The report also raised the question of how insurance-specific market conduct requirements can be ensured when insurance is provided within complex digital ecosystems where different players perform different roles in the value chain.