Tech innovation in insurance presents a big challenge for regulators
Technology and utilising big data can potentially redefine all aspects of insurance in what is a rapidly evolving digital world – but this also presents regulators with great challenges, law firm Pinsent Masons has warned.
The law firm pointed out that the UK Government and regulator – the Financial Conduct Authority (FCA) – have put a sustained focus on the role of innovation and disruption in the last 18 months, with a new approach to regulation evident through the FCA's Project Innovate and Regulatory Sandbox initiatives.
The firm said that regulators are attracted to innovation in part because the disruption it causes can help increase competition, which is good for consumers. But it stressed that all technological developments can have a significant impact for firms and the regulator alike.
"In a digital world, there are a multitude of applications for complex uses of data, both from a regulatory compliance perspective and reducing the regulatory burden in terms of sharing data with regulators – which is at the heart of the RegTech agenda – as well as the potential for data to redefine all aspects of insurance,” said Luke Scanlon, a financial technology expert at Pinsent Masons.
"In terms of product innovation, there are interesting developments that are highlighted such as InsurTech businesses providing short term cover. Data is central to ensuring those businesses can price products and create and collaborate with others in the sector to provide those services.
"There is of course the additional issue of assessing risk and the long-term need to increase accuracy in underwriting. For example with motor insurance, for some time we've seen the promise of telematics data being used to provide more accurate data, than the traditional means, for assessment of risk."
