The word “Fintech” has got on the vocabulary of every manager in financial services sector, even though most of them are just copying some software patches to improve efficiencies in the back office – that should have been there in the first place. Where as fintech in developed markets has crept in to the front end of acquiring and servicing customers expediently using technology.
Developments in this space will be very slow if the regulators don’t keep pace with industry developments. Inability to assess potential risks of innovative technology will only slow economic growth. The insurance regulator has to keep pace with global developments and support the Industry to innovate and grow in the local market.
An insuretech like Lemonade, the first so-called peer-to-peer insurance company, started by technology entrepreneurs, targeting smartphone users by offering ease-of-service transitions and cheap prices on homeowners and renters coverage, may get held up due to delays in regulatory approval in Sri Lanka, but not in the USA.
In the US, healthcare business post Obamacare paved the way to healthcare related Insuretech companies like Oscar, Collective Health and League.
✅Oscar is reinventing how to manage care, process medical claims, control healthcare costs, and provide transparency. With all the complexity hidden behind an easy experience for members, its making the healthcare system simple, smart and friendly.
✅Collective Health is a software and services company working to create a better healthcare experience. They assist companies in the U.S. to take better care of their people with a complete health benefits solution. They are bringing together the best medical, pharmacy, dental and vision networks.
✅League enables employers to provide their employees with health spending accounts, wellness accounts and group insurance plans, all delivered through a mobile-first platform. Users of the League App find health professionals, book appointments or speak to their team of advisors to get health tips. The League digital wallet allows users to pay for services from their phones.
Similarly, there are Insuretech providing online services (ZhongAn an Internet insurance company, in Shanghai), policy comparisons (Policybazaar in India) and aggregators who are all breaking in to insurance sector using technology. Rather than reject innovation due to the absence of regulations or for the lack of understanding the potential risks, the regulators should use professionals to help them understand the risks and encourage innovation. For example, Monetary Authority of Singapore (MAS) has outlined a framework for driving the country’s fintech industry, by supporting Fintechs with a conducive regulatory environment and ecosystem.
MAS will use a regulatory sandbox that would enable financial institutions to test products under less stringent laws which provides an environment where experiments could fail “safely and cheaply” without widespread adverse consequences, to the market. Applicants would be reviewed and approved to proceed with the sandbox by MAS. The regulatory sandbox guidelines outlined how startups or financial institutions could go about testing fintech products and services that were likely to be regulated by MAS.
Under this ecosystem MAS is planning to use the blockchain technology to pilot a system that could be used to issue and transfer funds between the participating banks. The pilot system would allow the participating banks to deposit cash as collateral with the MAS in exchange for MAS-issued digital currency, which could be redeemed later for cash. The banks then would be able to pay each other directly using the digital currency, instead of sending payment instructions through MAS.
Innovation can be managed with a similar governance framework alongside a conducive regulatory environment to encourage other competitors who are ready to invest in Insuretech to benefit the consumers and help the insurance sector expand. Existing insurers who are not willing to innovate will have to improve their processes to stay in contention with the Insuretech companies.