Following an initial focus on distribution channels, now all stages of the insurance value chain are being impacted by InsurTech and more broadly digitalization. Insurance products are increasingly capable of being purchased online, including through smart phones that allow such purchases at any time and from any place. Consumers also may benefit from the design of more personalized products and services adapted to their evolving and specific needs. This is driven by the greater availability of data and capacity for processing it, which also enables the development of increasingly efficient underwriting and claims management processes.
In order to harness the benefits of digitalization, incumbents have embarked on ambitious digital transformation projects and increasingly cooperate with InsurTech start-ups to benefit from their cutting-edge data analysis tools and technology. In the near future, other firms with extensive data analysis capabilities, such as Google, Apple, Facebook or Amazon, may reportedly also enter the insurance market, increasing competition. In this context, a possible fragmentation of the insurance value chain could occur, raising this possible scenario a number of potential supervisory challenges, including the outsourcing of activities and supervision of non-regulated entities.
Directly linked to the topic of Big Data, Artificial Intelligence is a technology that has a great potential in insurance, particularly in the area of claims management and fraud detection. Blockchain possible use cases in insurance are also reportedly constantly growing and therefore also have a great potential, particularly, at an initial stage, in commercial lines, in the re-insurance business and regarding intra-group transactions. Peer-to-peer (P2P) insurance includes arguably a stronger business innovation than the technological one, mainly digital peer-to-peer platforms, though regulatory and supervisory authorities may need to consider whether the classification of P2P insurance is sufficiently clear, and whether there is also a case for developing specific regulation for P2P insurance.
The above developments have the potential to significantly reshape the insurance landscape in coming years. Regulatory and supervisory authorities have a role to play, by encouraging financial innovations while, at the same time, ensuring a well-functioning consumer protection framework and financial stability. In doing so it is necessary to respect key supervisory principles such as proportionality, market integrity and technological neutrality. Initiatives such as regulatory sandboxes, innovation hubs or public-private partnerships show that it is possible to be innovative in the approach to foster financial innovation.
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