Innovation and regulatory supervision aren’t always considered the best of friends. We often hear that regulation stifles innovation, and that prudential and conduct requirements create a barrier to entry for small insurtechs looking to disrupt the industry (and provide a key reason for partnering up with an established player). But Clement Cheung (CEO, Hong Kong’s Insurance Authority) took the stage at Hong Kong Fintech Week to explain how regulation and innovation can go hand in hand.
Mr. Cheung highlighted two issues, and how insurtech can help:
- Traditional insurance distribution channels are not broad enough, and seem to exclude people from obtaining the security and peace of mind that insurance is designed to provide. Mr. Cheung picked out one key underserved segment, millennials, who are indelibly connected to their phones, who expect instant interactions and who live their lives online. Insurtechs could therefore provide new opportunities to reach these and other consumers.
- Insurance products can be complex and their design is not always customer-friendly. This leads consumers to purchase policies that are unsuited to their needs. But there is a perception that consumers are more likely to try to understand insurance policies and ask questions when policy documents are not being forced on them by their insurer or an intermediary, but are instead made available by an insurtech. In Mr. Cheung’s words, information on virtual channels is ‘pulled’ by, rather than ‘pushed’ onto, consumers.
Insurtech is much more than just tech-savvy distribution channels, but every once in a while it is good to remember some of the positives that insurtech presents from a regulator’s perspective. It is fair to say that regulation has had a hard time keeping up with insurance innovation, but for as long as regulators keep ‘turning up to the party’ and keep striving to better understand insurtech, the risk of regulation stifling innovation gets smaller and smaller.
The development of Insurtech could promote inclusiveness by delivering insurance products to the traditionally underserved or unserved segments.