“InsurTech – Rising to the Regulatory Challenge”: key messages from IAIS-A2ii-MiN Consultative Forum in Latin America

Written by the Access to Insurance Initiative and the Microinsurance Network

Buenos Aires was the location of the 14th Consultative Forum, which took place on 24 October 2018. Organised by the International Association of Insurance Supervisors (IAIS), the Access to Insurance Initiative (A2ii) and Microinsurance Network (MiN) in partnership with the Association of Insurance Supervisors of Latin America (ASSAL) and the Argentine National Insurance Supervisory (SSN) the Latin American Consultative Forum provided a platform for in-depth discussions about the future of insurance given the rise of new digital technologies. Around 80 high-ranking representatives from insurance companies, digital providers, policymakers and regulators shared their views on how different stakeholders can work together to facilitate innovation, consumer protection and market development. Here we share some key insights from the event:

New digital technologies have the potential to enhance financial inclusion

Digitalisation is rapidly transforming the insurance sector, paving the way for new companies and business models. For microinsurance these are particularly exciting times: as Andrea Keenan, Vice-Chair of the MiN and Senior Managing Director at A.M. Best underlined, technology providers stimulate fresh appetite to make financial inclusion a reality. New digital technologies can bring down administrative costs, can help to share information about products more effectively and can also help adapt them better to the customers’ needs. “If in the next 10 years we have not succeeded in translating insurance into the plain language used by ordinary people, we have not done our jobs. Technology provides us with the tools for achieving this,” says CNseg’s Alex Korner who spoke about the emerging InsurTech landscape in Brazil.

Innovation comes with uncertainties

Trust is an important element in inclusive insurance. To acquire, preserve and maintain consumers’ trust, all stakeholders in the process need to understand the risks and challenges presented by different digital innovations. For many consumers, digitally enabled inclusive insurance products are their first experience of insurance. Such products can therefore have a significant impact on the future growth of the market. The increasing amount of consumer data collected hold, for example, a risk for excluding some consumers. The challenge for regulators is to balance consumer protection with the need for innovation while maintaining a stable, competitive and level playing field.

Supervisory flexibility is important

Insurance supervisors play a crucial role in enabling innovation. Financial supervisors worldwide are exploring how best to enable innovation without compromising consumer protection. As Carlos Gonçalves from Brazil’s supervisory authority SUSEP pointed out, it is impossible to anticipate exactly how technology will develop, but its development is certainly rapid, making supervisory flexibility important, but not always easy to implement in practice.

Supervisors have different means to learn about innovation. A number of countries are establishing supervisory sandboxes, but these can be quite resource intensive and not implementable in every market context. Stefanie Zinsmeyer by the A2ii underlined that overall, commitment and communication with the market are important for the supervisor to better understand and learn about the developments and innovations in the field. Ekrem M. Sharper from NAIC shared that U.S. regulators have been reaching out to startups and insurers early in the process. They have facilitated numerous events bringing together supervisors, innovators and insurers and some cities in the U.S. are making efforts to establish themselves as InsurTech hubs.

Supervisors need to build up expertise to understand innovation

Understanding how big data is used, supervising chatbots that communicate with people or automated decision-making based on algorithms requires technological literacy and different supervisory skill sets and approaches, said Argentinean supervisor Ignacio Federici, and supervisors need to build up staff capacity. In this regard, we have seen examples of separate units set up within supervisory authorities focusing just on tech developments, the establishment of interdisciplinary supervisory teams and partnerships with applied research institutes to understand the risks and supervisory options better.

You can watch the 14th Consultative Forum in English or Spanish on the A2ii Youtube channel