Insurance companies in Asia are facing a "labyrinth" of regulations as they increase investment in the insurtech space, particularly in areas such as telematics, biometrics and big data, according to The Insurtech Revolution: Regulatory Updates and Innovative Evolution in the Insurance Sector, a new guide by leading law global law firm Baker & McKenzie.
With interest and investment in insurtech on the rise, this guide provides insights around the complex insurtech regulatory landscape and innovation trends, particularly in big data, that are likely to impact and disrupt insurers directly.
In Hong Kong, for example, the use of telematics is becoming more prevalent, enabling insurers to accumulate a wealth of customers’ behavioral information. This will allow insurers to have a deeper insight of their customers, which in turn will assist in formulating new directions for products and pricing their risks more accurately.
According to Singapore-based fintech and insurtech expert Stephanie Magnus, Principal, Baker & McKenzie.Wong & Leow, insurers will also need to devise controls and systems for these analytics to be appropriately integrated into the offering to the customers, such as offering premium discounts and determining future premiums.
"As the use of such analytics may directly affect the customers, any incidents of misuse, leakage or improper application of such analytics will pose a reputation risk for the insurer. Legally, insurers will of course need to be particularly mindful of the need to ensure the accuracy and reliability of this information, and of course how they can protect the privacy of customers."
In Singapore insurance companies are looking to mine data sets to identify underwriting opportunities for those who suffer chronic illnesses such as dementia and obesity. Developing or acquiring big data capabilities can also mean insurers are better able to adopt end-to-end analytics solutions that cross the entire insurance value chain.
The report also draws out the key concerns for established players and new entrants, namely:
- Dealing with data privacy
- Further cybersecurity concerns
- Wide variations in regulatory approach to insurtech
- Securing talent and developing and securing skills and knowledge
Reflecting on the report, Ms. Magnus said:
Asian hubs such as Hong Kong and Singapore have been working hard to understand and harness the opportunities inherent in fintech, and this is quickly expanding to other financial services subsectors, with insurance becoming a prime focus. How regulators embrace this disruption and simplify the current labyrinth of regulations in their market while protecting consumers and businesses will determine who wins this race.
The next report in this series will examine M&A trends in the insurtech sector.