Digital innovation in the insurance sector: two publications on trends related to FinTech and SupTech
Today, the International Association of Insurance Supervisors (IAIS) issued two publications showcasing work on digital innovation:
- An IAIS Report on FinTech developments in the insurance sector
- A Joint Note with the Access to Insurance Initiative (A2ii) and the Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) on the role of supervisory technology (SupTech) in insurance supervision
IAIS Report on Fintech
Given the rapidly increasing ease of accessibility and digital innovation in financial technology (“FinTech”) and its far-reaching effects on the insurance sector, the IAIS has identified FinTech as one of its strategic themes. FinTech presents significant opportunities for financial inclusion and policyholder value yet also poses market conduct and operational risks with the rapid expansion in alternative data sources and advanced data analytics having the potential to disrupt the insurance market or impact the trust of consumers in the sector. This report presents the outcomes of exploratory, deep dive assessments into three topics: Use of application programming interfaces (APIs) and open data; distributed ledger technologies (DLTs) and blockchain; and safe, fair and ethical adoption of artificial intelligence (AI) and machine learning (ML) and the use and governance of data.
Joint A2ii FSI IAIS Note on SupTech
Given the increasing importance of the role of supervisory technology (“SupTech”), insurance supervisors see the need to clearly understand the potential of Suptech to aid their work. This note aims to contribute to this understanding by citing concrete examples of how SupTech tools are used by 22 insurance supervisors. It covers 38 SupTech tools, which are classified according to their intended use – whether for prudential or market conduct supervision or both. The note finds that SupTech tools used by insurance supervisors for prudential supervision are similar to those used by banking supervisors. Most of the reported conduct tools, on the other hand, are specific to the insurance sector. Meanwhile, most of the tools that may be used for both prudential and market conduct supervision deal with data collection. Going forward, many insurance supervisors are specifically aiming to develop integrated systems that cover different applications and cover the entire supervisory process.
Going forward, the IAIS will continue to monitor these trends and their impact on insurers, consumers and supervisory objectives.