The growth of new start-up companies offering technologically enabled insurance or financial innovations has resulted in a surge of interest by the public, regulators, and the existing insurance industry. In fact, many legacy insurance companies are also exploring these innovations. The growth in these innovations has raised numerous questions. Some call the broad array of innovations “disrupters” and some see the new ideas as transformative and the necessary evolution of the insurance industry in the 21st century. Regardless of the opinion about the innovations, these ideas are challenging some of the basic premises of insurance regulation. These innovations that affect financial sectors generally are referred to as FinTech and those that affect insurance are referred to as InsurTech.
These start-ups are targeting all areas of the insurance value chain – from marketing and distribution, to underwriting and pricing of risks, and ultimately to settlement of claims. In most cases individual start-ups are focusing on improving specific aspects of the value chain and collaborating with existing companies, but there have also been limited examples where start-ups are looking at ways to remove the need for an insurer - using peer-to-peer type business models.
Complicating the analysis of these endeavors, the main types of InsurTech innovations can be divided into many categories:
These InsurTech products can result in policyholder advantages including coverage/premium reductions and convenient access, but they can also result in policyholder disadvantages like loss of privacy and claim payment uncertainty. In addition, NAMIC members have expressed concerns about whether start-ups are complying with all insurance laws and whether there is a level playing field for the existing companies.
As this arena is still emerging, NAMIC’s views are continuing to evolve as well. They may also depend on the specific issues arising from each form of technology offered. Generally, NAMIC is supportive of innovation and believes the legal and regulatory systems should allow for robust development of new technologies, products and services that are beneficial to society. At the same time, we do recognize the need to balance the value of innovations with the interests of the policyholders and to assure that all products are offered with a level playing field for new entrants as well as existing insurers. As innovation goes forward, NAMIC believes the insurance industry should continue to play a leadership role as it has done historically to promote safety and the protection of persons and property.