The financial watchdog has sent a warning shot over the bows of the insurance industry following concerns that firms are using social media sites to snoop on policy holders and push up their premiums.

City regulator the Financial Conduct Authority has just completed its initial review into the use of big data in the market, which according to some reports is likely to lead to a full-blown investigation.

This could usher in tougher regulations on how companies gather information on customers.

In the US, the Federal Trade Commission has already acted on growing fears of discrimination; last week it published a report which warned firms that any such moves could lead to official action.

But speaking to the Sunday Times, the Association of British Insurers refuted the claims, insisting big data could potentially transform the market and make "insurance work better for customers".

The trade body said: "Insurers take their responsibilites very seriously and treat personal data sensitively and securely".

The Parliamentary Science & Technology Committee is also investigating the issue, having launched the "Big data dilemma" inquiry late last year.