Aug 20, 2020

Deloitte indicates how regtech could transform insurance

William Girling
2 min
Insight from Deloitte indicates that partnering with regtech entities could be the only way for insurtechs to continue innovating in an increasingly regulated industry
In an insight article, consultancy company Deloitte outlined how the evolution of regtech could prove pivotal in the overall development of insurance...

In an insight article, consultancy company Deloitte outlined how the evolution of regtech could prove pivotal in the overall development of insurance.

In such a highly regulated industry, insurers can find it difficult to maintain a cutting-edge level of innovation while still remaining compliant. In fact, Deloitte believes that focusing on the latter is actually have a deleterious impact on the former:

“The sheer volume and complexity of new and existing regulations have had the unintended consequence of encouraging financial service providers to focus on compliance rather than innovation.”

To counter this, Deloitte suggests, companies must adopt a lean and agile operational philosophy driven by a ‘watch, but don’t wait’ mentality.

Embracing new infrastructure

One thing is certain: companies in the insurance and insurtech space cannot hope to maximise their potential for innovation by clinging to legacy systems and technology.

Cloud computing can form the foundation upon which the desired flexibility is developed and enterprises can opt to design new infrastructure in-house if they choose. However, it can often be cheaper, more efficient and more rewarding to collaborate with leading regtechs who may already have scalable solutions to suit specific digital transformation goals.

The report notes that the following are just a condensed selection of the technologies currently being deployed by regtechs:

  • Blockchain to speed up the transaction ‘journey’ with enhanced transparency and security.
  • APIs (Application Programme Interfaces) to facilitate the smooth integration between newly developed tools and pre-existing systems.
  • AI/ML (Artificial Intelligence/Machine Learning) algorithms which make use of real-time Big Data streams to analyse for patterns, enhance decision making and automate time-consuming research tasks.
  • Visualisation solutions can speed up the comprehension of complex data by rendering it in more manageable ways.

How each regtech chooses to mix and match various technologies will be dependent on the specific application it endeavours to solve.

In our recent Top 10 exploring startups in the regtech space, we discovered several companies taking an innovative approach to technology, including Hummingbird, Elliptic and Ayasdi.

Although the digital era will entail a lot of change for insurance generally, we can safely assume that matters concerning regulatory compliance will persist.

Choosing the right partners to navigate the future will be crucial and it is by doing so that regtech could help innovation within the insurance industry flourish.  

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May 28, 2021

FCA bans ‘price walking’ for insurers from Jan 2022

3 min
The City regulator has said insurers must not raise prices at renewal and penalise loyal customers

Insurers will no longer be allowed to raise premiums upon annual customer renewals following a new ruling by the Financial Conduct Authority (FCA)

The new move, which comes into effect in January 2022, will directly affect people renewing their home or motor insurance because they will pay no more for their premiums than a new customer. 

The FCA said the change will save loyal customers an estimated £4.2bn over a 10-year-period. However, it also admitted the move could mean cheaper deals for new customers can no longer be sustainable for insurers attempting to attract business. 

Price walking practices ended

According to reports, the FCA has been working on changing the rules on ‘price walking’ as it is termed, because customers are charged more their annual premiums, even though their level of risk remains the same. The system has resulted in complaints from consumer groups that loyal customers pay more unnecessarily.

Speaking about the regulatory change, Sheldon Mills, from the FCA told the BBC

"These measures will put an end to the very high prices paid by many loyal customers. Consumers can still benefit from shopping around or negotiating with their current provider, but won't be charged more at renewal just for being an existing customer."

Victory for the customer

Consumer groups have hailed the change as a victory for customers who have ended up paying higher premiums unnecessarily, but admitted it presented huge implications for insurers in the short term.

Consumer Intelligence CEO, Ian Hughes said, “These changes represent a tsunami for both insurers and their customers, but we should be in no doubt that the fault line that sits underneath this is fair value, mentioned 153 times in the final statement. GIPP changes will feel like just a ripple for those who don’t offer fair value to customers."

He continued, “This is going to be a bumpy ride for insurance brands and consumers alike in the short term. Today, the FCA has revealed that cash and cash-equivalent incentives, other than toys and carbon off setting, cannot be used to entice new customers without being offered to renewing customers. This means the savviest consumers who shop around each year will see prices rise and discounts and offers disappear.

“However, there is an opportunity for the industry to take advantage of all this change that is coming and do something that will be good for brands, good for the industry and good for consumers."

Consumer Intelligence PR and communications manager, Catherine Carey agreed, and described the victory as “a shot in the arm for innovation.”

Carey said the move “presses a giant reset button on the relationship between price and value, it will change the relationship between brands and consumers.”

She explained, “We expect to see insurers changing their models and new firms entering the market for the first time as loss-making year one pricing phases out. If you look at these new rules, and specifically the introduction of fair value, it’s the most exciting time for the development of the general insurance market for decades.”

Hughes also warned against insurers resisting the regulatory change, “Those that don’t take advantage of the opportunity are going to find it really tough.”

He added, “The tipping point we find ourselves at today is a critical point in the journey of this industry and there is an opportunity to be positive.”


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