Insurers’ digital business models

How to meet supervisory expectations

This report is intended as a practical guide to how insurers can address key supervisory concerns associated with the ongoing digital transformation of their business models. We identify four key digital trends in the insurance industry, based on a number of technological enablers, and for each of these, outline the specific areas of likely supervisory concerns, and actions insurers can take to address these.

While the digital transformation of the insurance industry presents insurers with a number of opportunities, it is also crucial that they address the associated risks in a way that meets supervisory expectations. Supervisors’ concerns in relation to insurers’ digital transformation are not novel, but instead revolve around universal supervisory prudential and conduct considerations or ‘constants’. The ongoing digital trends do, however, require insurers and supervisors alike to consider carefully how to apply existing regulatory principles and approaches to the new manifestations of risks brought about by technological development and innovation.

Our report explores the following digital trends in the insurance industry in the light of these supervisory constants:

  1. Changing consumer expectations and technology will alter product dynamics – Increased digital adoption, enabled by evolving technology, is quickly changing consumers’ buying habits as well as their expectations of insurance products. This, in turn, is changing the dynamics of insurance products, with a growing demand for product flexibility, availability and transparency
  2. Automation will streamline core insurance functions – New technologies are helping insurers automate and streamline traditionally manual processes in several core insurance functions including claims, pricing and underwriting.
  3. Focus on delivering complete customer experiences through digital platforms – There is an increasing focus on combining products and services into complete customer-centric experiences, delivered digitally through one-stop online platforms.
  4. New ways of interacting with and sharing data will transform the market place – Technological tools enabling the gathering of large amounts of data are gaining prominence as insurers respond to the growing demand for customised products and services, as well as cost pressures and competitive dynamics.

The digital transformation of the insurance business model entails material changes to most core insurance functions, and ensuring associated risks are addressed appropriately is a critical priority for insurers’ boards and senior management, as well as for supervisors. It is therefore essential that insurers build supervisory confidence in their digital strategies. Our report is intended to help boards and senior management do this.

About the Centre for Regulatory Strategy, EMEA

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