Building Momentum for Digital Disruption in Insurance
Raymond G. Farmer NAIC Vice President and Director, South Carolina Department of Insurance
MODERATOR
Peggy FuAssociate Director,
Market Conduct, Hong Kong Insurance
Authority
Andrew CandlandHead of Division, Insurance
Supervision Directorate, Central Bank of Ireland
Erika Bothma Program Director –
Hartford InsurTech Hub Powered by
Startupbootcamp
Sonja Larkin-ThorneConsumer Advocate
Mojgan LefebvreSenior Vice President and Chief Information Officer, Liberty Mutual
Global Specialty
The regulator’s role
■ Given objectives and legal framework
■ Example – the Central Bank of Ireland’s Mission Statement: 'Safeguarding Stability, Protecting Consumers'
■ A balancing act
Challenges to and responses by regulators
■ Not new, but very different
■ Ireland, Europe and the World
■ What’s in it for me?
NAIC International Insurance Forum Building Momentum for Digital Disruption in Insurance
14-15 May 2018 Washington D.C.
Peggy Fu
FinTech/Insurtech
• Seems like everyone in the insurance industry is talking about FinTech or Insurtech.
• But how much we really know about it? – Startups – Big data, mobile internet technology, blockchain technology, facial
recognition technology, ….. – IoTs like wearable devices for health insurance, sensors for home
and motor insurance, ……. – Use of AI to collect new data and chatbots to improve customer
experience – Data privacy and cyber security
Benefits to Customers
To name a few:
• Insurers are paying more attention to customer experience and improving their communication modes.
• Underwriters are able to gather more up-to-date information through technologies and to offer better policy terms to good customers.
• Emergence of online comparison platforms enhances market transparency which in turns drives market competition.
• Wider choices of insurance products and greater personalization of policies.
• Online submission of insurance claims speeds up processing of straightforward claims.
Potential Risks to Customers
• Whether customers accessing insurance product or claim information through online platforms especially mobile devices will pay sufficient attention to key terms and conditions?
• How customers can assure the products they buy online are suitable?
• Whether client services will be seriously disrupted due to issues such as technical problems where operations are highly automated?
• Whether customers are fully aware of the use of their personal data collected via technology like IoTs or used in blockchain technology?
• Whether customers understands the implication of unauthorized use of their personal data and data breach?
• Whether premiums for high-risk customers will be unaffordable?
Understanding of Development is Important
• Inherent risk of innovation – reliability, integrity and privacy risks
• Startups’ low level of awareness of regulatory and compliance requirements.
• Impact on customers – recognition of different reaction of different kinds of customers, in particular,
retail customers – vulnerable customers’ needs – consumer habits, expectations and preferences may change rapidly when new
technology emerges
• Readiness of insurers – senior management’s responsibility and security awareness of staff – internal controls to prevent data breaches and safeguards against cyber
attacks
Latest Developments in Hong Kong
• Insurance agents and brokers continue to be the major distribution channels but online insurance sales are expected to grow.
• Despite no material change in the major types of online insurance products (which are still mainly simple personal products such as travel, household, personal accident and term life insurance), the following changes are seen:
– user interface design for mobile websites is significantly improved; – development of user-friendly mobile apps; and – a wider choices of coverage to cater for different client needs;
to elevate customer experience.
Latest Developments in Hong Kong
• Emergence of more insurance mobile apps for different purposes: – selling of insurance products to the public directly; – assisting insurance intermediaries’ selling of insurance products; – enabling policyholders to check policy details; and – facilitating lodgment of claims by policyholders.
• Life insurers have increasingly equipped insurance agents with tablets loaded with proprietary software to record client information, conduct FNA (financial needs analysis), submit applications and perform necessary administrative tasks for issue of life policies.
• Use of GPS technology in helping save Mainland clients’ time to meet the physical presence requirements for procurement of life insurance.
Latest Developments in Hong Kong
• Digital KYC for online insurance application – Use of technologies for client identity verification:
• Document forensic algorithms • Facial recognition technology
• Investment in an established insurer by a giant tech firm to launch a digital insurer.
• Insurance comparison websites/apps with different business strategies and target clients:
– Selling of products/provision of advice to the public – Provision of product and other information to insurance
intermediaries (insurance agents/brokers)
Latest Developments in Hong Kong
• Fraud Prevention
– Insurance Claims Database • Focus on motor, medical and accident insurance at the initial
stage. • Collect and analyze claims data with a view to identifying
fraudulent insurance claims at an early stage. • Detect patterns of fraudulent insurance claims using big data
analytics technology to enable early preventive measures to be taken.
– E-Cover Notes • Fake motor insurance policies sold by fake insurers/insurance
intermediaries. • Inclusion of QR codes for verification of genuineness of motor
insurance policies using blockchain technology. • Facilitate checking by Transport Department and Police.
IA’s Response to FinTech/Insurtech Developments
• Insurtech Facilitation Team – Proactively assists startups (local and overseas) in understanding the regulatory
requirements relevant to their proposed operations relating to insurance. – Ascertain regulatory requirements which may be relaxed to facilitate digital
operations.
• Fast Track for applications authorization of new insurers using solely digital distribution channels
– Review of existing regulatory requirements relating to FNA to facilitate online distribution of certain endowment and universal life insurance products.
→Exemption to be granted if certain conditions are met.
• Insurtech Sandbox for pilot run of existing insurers’ digital operations – Review of existing regulatory requirements relating to benefit illustrations
provided to policyholders. →Requirements to be simplified if certain conditions are met.
IA’s Response to FinTech/Insurtech Developments
• Cybersecurity – Insurers are encouraged to join the Cyber Intelligence Sharing
Platform to share cyber incidents with other industry players.
• Conduct Requirements – Review of conduct requirements for online platforms:
• Adequate financial, human and technology resources • Adequate staff with sufficient expertise and understanding of
relevant technology and algorithms used • Proper procedures and internal controls for:
– Collecting and validating client information – Ensuring reasonableness of recommendation – Conducting regular reviews of recommendations given
on the platforms – Keeping proper audit trails and records
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Technology-enabled innovationTargeted at the insurance sector
New business models, applications, processes, productsEmerging technologies transforming insurance business
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AREAS OF ACTIVITY
GROWING INSURER INVESTMENT
IN TECH STARTUPS
0
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30
Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17
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Property & Casualty Life, Annuity & Retirement
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ERIKA BOTHMA
2018 International Insurance Forum
Sonja Larkin-Thorne Consumer Advocate
May 14, 2018
Building Momentum for Digital Disruption in Insurance
“You do what you think is right and let the law catch up” Thurgood Marshall, First African American Associate Justice of the Supreme Court of the United States
“The policy of being too cautious is the greatest risk of all” Jawaharial Nehru, The first Prime Minister of India
Building Momentum for Digital Disruption in Insurance
● WHAT’S OLD IS NOW NEW?
● Innovation is a hallmark of the insurance industry, from product design to use of credit score and data collection.
● The insurance industry has always collected historical data and made long term predications.
● SO WHAT HAS CHANGED?
● Challenges with profitability, pricing pressures, competition, losses, natural disasters and the need for improved efficiency.
● Risks today are not what they use to be. ● Consumers demand for new products ● International standards. ● Non traditional insurance company providers. ● THE DATA PROVIDERS, QUALITY AND QUANTITY OF DATA, ARTIFICAL
INTELLIGENCE, PREDICATIVE ANALYTICS, EMERGING TECHNOLOGIES IMPACTING HOW DATA USE IS DRIVEN.
Building Momentum for Digital Disruption in Insurance
● What’s New? ● Disruptive Innovation (DI) vs. Innovation ● What is DI? The process of developing new products or services to
replace existing technologies and gain a competitive advantage. (an innovation that creates a new market by providing a different set of values, which ultimately overtakes an existing market)
● Examples: SERFF (NAIC system for electronic rate and form filing. ● Credit Score and Apple in the early 2000’s
Building Momentum for Digital Disruption in Insurance
● What’s New ● Using massive volumes of unconventional data sources that are suppose to empower
insurers to more accurately predict customer behaviors, better anticipate losses and allow competitively priced risks.
● Examples in a recent filing: number of daycare in 3 miles, number of amusement park in 10 miles, distance to nearest drinking place, number of drinking place in 5 miles, NUMBER OF LAWYERS IN 3 MILES, distance to nearest car rental place, number of hospital in 8 miles, number of stores in nearest mall, distance to nearest mall, average # of vehicles per household in a census block, the household size in a census block, the ratio of age over 65 in a census block, median age in a census block, population density group, the ratio of house built after 2000 in a census block group, the ration of house built before 1950 in a census block group, the speed limit of nearest street, the range of temperature. Homeowners products that sell lesser coverage's “because that’s what the consumer wants”
Building Momentum for Digital Disruption in Insurance
● CONSUMER and REGULATORY CONCERN’S
● Lack of TRANSPARENCY, consumer EDUCATION and the ability to SHOP and COMPARE the PRICE and Product being purchase.
NAIC: Building Momentum for Digital Disruption in Insurance 05.14.18
Mojgan LefebvreSVP & CIO, Global Risk Solutions Liberty Mutual Insurance
SVP & CIO, Liberty Mutual, Global Risk Solutions SVP & CIO, Liberty Mutual, Global Specialty SVP & CIO, Liberty Mutual, Commercial Insurance
CIO, bioMerieux
CIO, TeleTech
Team Leader, Bain
Developer, BellSouth
Lived and worked in US, France, Tunisia, Israel, Russia and Iran
Mojgan Lefebvre Liberty Mutual
Large, globally-diversified P&C insurance carrier
30 Countries 55K Employees $122B Assets
$37.6B Revenue #75 Fortune 100
The megatrends have the most impact on the future of insurance and are disrupting prevalent operating models
$352B $3B$20B $20B
Customers will experience shifts in risk, from human to machine, as well as emergence of new risks
Future of risk where exponential change and disruption are creating opportunity
P&C carriers are exhibiting an increased focus on leveraging technology, data, and analytics to boost
profits and satisfy customers
Emphasis on analytics to
improve performance
Exploration / adoption of
the ‘Internet of Things’
Focus on customer
experience improvement
Investment in technology to
refine operating
model
Slow evolution of distribution
channels
Changing market
dynamics and demographics
A multi-faceted approach to disrupt insurance from the inside out
Workgrid Software Reimagining the employee digital experience
Telematics enable us to provide an on-demand, personalized offering
ByMile™ enables continuous customer engagement paired with dynamic, behavior-based pricing.
Emerging Technology Exploration
Blockchain – exploring use cases within reinsurance and subrogation AI-based deep learning engine improves billing accuracy Robotics Process Automation (Blue Prism) to automate manual tasks
Increased focus on customer journey and experience
Increased focus on the customer journey and experience Our journey towards agile