This March, The Fintech Times is shifting its spotlight towards insurtech, exploring the potential impact of blockchain technology on insurance processes and its role in instilling trust in digital transactions.

Navigating the intricacies of regulatory frameworks presents a formidable challenge for insurers operating on a global scale, as regional variations significantly influence their strategies and operations worldwide.

These regulatory disparities dictate product development, distribution methods, capital requirements, risk management practices, and market entry decisions.

To delve deeper into this, we consulted industry experts for their insights on how regional regulations shape insurers’ approaches and activities across diverse markets.

Unified approach

Regional variations in regulatory frameworks have significant impacts on insurtechs and insurers’ strategies and operations worldwide, says Caroline Hanotiau, general counsel at insurtech Qover.

“The operational complexity of managing compliance efforts and monitoring updates and changes in regulations can be resource-intensive. Additionally, stringent regulatory requirements in certain regions may act as a barrier to market entry, limiting potential expansions for insurers.

“Innovation can also be constrained by regulatory requirements in certain regions, which may restrict product development and distribution rules.

“However, at Qover, we have developed a unified API that allows us to navigate these challenges and ensure compliance across all countries, while still innovating and providing consumer protection.”

Central bank regulation

Mustafa Melhem, business development manager for insurance at Eastnets, a global provider of compliance and payment solutions for the financial services sector, addresses the importance of central bank regulation in fostering stability and mitigating fraud in well-regulated insurance markets.

“In many regions, the insurance sector is regulated directly by the central banks through a dependent or independent insurance authority. We consider these regions as well-regulated insurance markets.

“They offer a strong and stable insurance market, empower the local insurance sector, foster better partnerships with the global reinsurance and financial sectors, and protect policy holders and beneficiary rights.

“These markets also offer protection of any third parties’ rights, such as healthcare providers and other insurance service provider. They also empower the insurance companies’ solvency margins and ensure strict control of fraud and money laundering.

“In other regions, where the insurance sector is reporting to different governmental departments or ministries, the central banks are not fully involved and therefore these regions are poorly regulated. So, these markets are lacking the above benefits, which encourages increased fraud.”

Robust IT systems

“Insurers are, and have always been, under enormous pressure to make their products conform to the regulatory needs of every geography they serve,” says Sam A. Shay, creative director at Socotra, which provides a modern enterprise platform  to insurance businesses.

“Even a small insurer that sells only one basic personal auto product in the U.S. has to create a variant of that product for each state, greatly increasing the complexity of doing business across any kind of border. The resulting amount of compliance work, product definition and more that goes into growing into larger regions or offering a more expansive product portfolio can be incredibly cumbersome.

“The insurers best-poised to handle this are the ones that use IT systems with robust insurance product inheritance models that allow them to easily configure each of their products to suit every regulatory environment the product is offered in – rather than offering unique products for every geography.”

Managing compliance

“Regulatory differences significantly shape the strategies and operations of global insurers, influencing product development, distribution methods, capital requirements, risk management, compliance, and market entry, including mergers and acquisitions (M&A),” says Ryan Cox, senior director and head of AI Business at digital transformation consulting firm Synechron.

“Insurers must customise their products to comply with various regulations, align distribution strategies with legal frameworks and maintain adequate capital to meet solvency requirements. They also need region-specific risk management strategies to navigate varying compliance standards and associated costs from one region to another.

“Market entry decisions hinge largely on regulatory landscapes, with insurers preferring markets with more favourable regulations while acknowledging regulatory challenges.

“M&A activities require thorough assessment of regulatory impacts and approvals across jurisdictions. Despite regulatory complexities, insurers can find opportunities by proactively managing compliance, maintaining operational flexibility, and using technology to enhance regulatory processes’ efficiency.”

Adaptable strategies

Highlighting the dynamic impact of regional regulatory variations on insurers is Javed Akberali, co-founder and managing director of insurtech Wellx, who said:

“Regional variations in regulatory frameworks significantly impact insurers’ strategies and operations worldwide. Differences in data protection laws, licensing requirements, and compliance standards require insurers to adapt their business models and strategies to each jurisdiction.

“This variation necessitates a flexible, informed approach to global insurtech operations, underscoring the importance of understanding and navigating these disparities to succeed on the international stage.”

This March, The Fintech Times is shifting its spotlight towards insurtech, exploring the potential impact of blockchain technology on insurance processes and its role in instilling trust in digital transactions.

As insurers strive to meet the evolving needs of a digitally-savvy customer base while addressing the persistent challenge of financial inclusion, they are increasingly turning to fintech solutions.

These innovative technologies not only enable insurers to streamline operations and enhance customer experiences but also play a pivotal role in extending financial services to underserved communities.

Let’s delve into how industry observers say insurers are leveraging fintech solutions to bridge the digital divide and enhance financial inclusion.

Tailored options

Janthana Kaenprakhamroy, CEO and founder of insurtech Tapoly, addresses how insurers are offering tailored digital insurance options, innovative distribution channels, and advanced technology solutions.

“Insurers are increasingly turning to insurtech solutions to address the challenge of closing the protection gap and promoting financial inclusion, especially in underserved regions. By leveraging fintech innovations, insurers can bridge the digital divide and extend insurance services to populations with limited access.

“These solutions enhance accessibility by providing digital insurance options tailored to the needs of underserved communities. Insurtech enables insurers to offer simplified and cost-effective insurance products, making them more accessible to individuals who were previously excluded from traditional insurance markets.

“Additionally, insurtech facilitates innovative distribution channels and advanced technology solutions, ensuring that insurance products reach remote and marginalised populations. Overall, the integration of insurtech in the insurance sector is instrumental in narrowing the protection gap and promoting financial inclusivity on a global scale.”

Making inroads

Technology simplifies insurance, aiding inclusion, particularly in underserved regions, with embedded products enhancing accessibility and family wellbeing, says Darran Simons, head of insurance, EMEA at data analytics company FICO.

“Insurance policies and products can often be complex, high-touch, and very time consuming. Insurers can leverage technology solutions to both design and offer products that are easier to understand and to purchase. For example, a property policy may have historically required physical inspections, but now that same information might be available directly from public or private third party databases.

“Similarly, there might be enough application and public information available on applications for some types of life or health insurance that may not require time-consuming medical testing. By identifying the kinds of policies that can make a difference in underserved regions, and then utilising the technologies, platforms and analytics that are available in the marketplace today, insurers can make bigger inroads into inclusion across all socio-economic groups.

“We are also seeing this leveraged with the increase of embedded insurers products making insurance more accessible in some regions, and aiding typical demographics that might previously forego vital protection products to support the wellbeing of them and their families.”

Flood risk

Bob Schiller, director of product innovation at insurer SageSure addresses the significant gap in flood insurance coverage by highlighting the role of data in accurately assessing flood risk and facilitating insurers’ adaptation to evolving risks.

“For flood insurance specifically, the gap between the number of homeowners exposed to some level of flood risk and the number of homeowners who have flood insurance is vast. To date, only five per cent of homes in the US and 30 per cent of homes in FEMA-designated high-risk flood zones have flood coverage even though 99 per cent of US counties are impacted by flooding. Recent studies have shown that compared to FEMA estimates, there are 1.7 times more properties that have substantial flood risk.

“Data can support efforts to assess flood risk more accurately, especially as the risk itself continues to evolve. As data increases insurers’ ability to adapt to changes in risk, and as models are updated on a much more frequent basis, decision-makers throughout the insurance value chain are better positioned to educate consumers and connect them to solutions that address their home’s exposure.

“Many insurers are developing competitively priced private flood insurance products that leverage the latest advances in flood risk modeling, which will continue to support efforts to increase flood coverage take up and close the protection gap.”

Harnessing technology

Rob Bauer, group chief MGA officer at international insurtech bolttech, says technology is critical to closing the protection gap, which Swiss Re quantifies at $1.8trillion up from $1.3trillion, just a few years earlier.

“We’re beyond refrigerators telling owners that a critical part is about to fail, or the warranty needs an update. In the developing world, mobile phones can self-diagnose screen damage, and activate a repair network with little human intervention.

“Life insurers are using inputs from wearable technology like Apple Watches to alter mortality tables, which drives precision-pricing and risk selection. For example, if technology can show an individual has run five miles, each under eight minutes, three days a week for the last three months … do you need a comprehensive medical exam?

“Insurers are figuring out how to use the tsunami of data at their fingertips, and make it meaningful to better risk-select, underwrite, and price.”

Brokerage strategies

David Embry, CEO and founder of insurance broker Mylo, says:  “Many small businesses and individual customers have traditionally gone unserved because agencies can’t efficiently grow their own businesses and process a high volume of these often complex transactions.

“Technology is changing this equation – providing an easy and cost-effective way to analyse customer needs quickly, streamline the underwriting process, match needs with carrier appetites and more.

“We have been able to scale while giving underserved customers the personalised guidance and expert solutions they need. Our insurance intelligence engine efficiently analyses data, makes expert coverage recommendations, and matches needs with personalised solutions from more than 100 leading carriers.”

Influence of gen AI

Elad Tsur, a serial entrepreneur specialising in machine learning, big data, and AI, is the CEO and co-founder of Planck, an AI based data platform for commercial insurance. He foresees a substantial decrease in insurance premiums, driven by the widespread adoption of GenAI.

“I believe GenAI adoption is going to dramatically impact overall loss ratios. It will improve loss models and play a huge role in driving down insurance costs.

“And I foresee a significant decrease in premiums, not just one to two per cent. In time, by more accurately assessing risk and pricing insurance, we can make it more affordable and bring access to more underserved businesses and consumers.”

A number of home and buildings insurance customers in the UK have felt bullied or cheated by their insurers while making claims, making the process significantly more difficult, a new investigation by the consumer champion Which? has found.

Which? has revealed concerns concerning policyholders who aren’t getting what they are entitle too by claims processes that are being “dragged out” by home insurers. The consumer champion also found that some insurance customers have reported facing adversarial treatment from claims staff when claims are being decided or settlements determined – prolonging the ordeal for those trying to find a satisfactory resolution after often distressing events.

The consumer champion submitted a Freedom of Information request to the Financial Ombudsman Service (FOS), which acts as a free mediator between companies and consumers. The data identified the 11 firms most likely to be found at fault in cases involving delays, declined claims and claims value disputes by the FOS.

Rocio Concha, director of policy and advocacy at Which?, explained the shortcomings of home insurers: “Our investigation paints a concerning picture of the home insurance market, which is clearly not providing value for money for many customers.

“When customers make claims, they should not be made to feel like a liability or face a needlessly adversarial process, which can prolong what is in many cases an already distressing experience.

“The FCA’s Consumer Duty sets out very clear expectations on how firms should treat customers. The regulator needs to investigate and ensure that insurance companies are adhering to these rules and be ready to take action against those that don’t.”

Where do the problems lie?

According to the Financial Conduct Authority (FCA), 47 per cent of the population shows at least one characteristic of vulnerability (poor health, low capability, recent negative life events and low financial resilience) and the regulator expects firms to have processes in place to support them with appropriate levels of care.

Which? has also found an increase in the number of upheld customer complaints against insurers, suggesting firms are wrongly denying customers the money they are owed – and therefore deepening their stress and worry. Forty per cent of claims made to the FOS were upheld in the customers’ favour in April-June this year, compared to 31 per cent in the same period last year.

During 2022, 99 per cent of car insurance claims were accepted, but this figure was just 68 per cent for standalone buildings cover, and 76 per cent for claims on combined home insurance policies.

Speaking to nine claims experts, Which? discovered that one reason for home insurers failing to deal with claims in good time could be down to underinvestment in staff and training, leading to undertrained and inexperienced claims handlers and increased bureaucracy.

Another issue faced by some customers is the inherent imbalance of power between the firm and claimant when it comes to negotiating cash settlements. If the claim is complex, customers may struggle to check and challenge the insurer’s conclusions or simply be unable to afford the delay to getting the claim sorted, which could force some claimants into feeling as if they have no choice but to accept a lower payout.

Which? has recommended that the FCA investigates to ensure buildings insurance companies are complying with the Consumer Duty.

Pet insurers saw claims volumes and payouts hit record highs last year, leading to growing losses for the sector. In an effort to tackle this problem, CRIF, the risk management solution provider for the financial services industry, has launched ‘Pet Check’.

UK pet insurers received 1.3 million claims in 2022, a 28 per cent increase since 2021, which coincides with £42million loss in 2023. Despite the rising cost of living, new owners are increasingly likely to want to insure their pets and do their research beforehand, with increased demand for comprehensive products and streamlined customer services concluded a CRIF roundtable discussion.

Hoping to ease concerns for pet insurance companies, CRIF’s latest launch aims to help them validate the details of the UK’s pets in real time and insure them with greater ease and confidence. ‘Pet Check’ is a tool to be used at the point of quote, and enables insurers to instantly verify a pet’s details – including age, breed, sex, species, breed and pre-existing conditions – as well as their policy holders’ claims history.

The Pet Check service provides insurers with a broader, more accurate understanding of what insuring that pet could entail, helping to improve the loss ratio, and the policy underwriting process, to effectively address the risk of potential underwriting fraud and misrepresentation.

Sara Costantini, regional director for the UK and Ireland at CRIF, explained: “Insurers appreciate these are tough financial times for many pet owners. They are committed to providing policies that are priced appropriately and give people peace of mind. Pet Check will help them to avoid making a dog’s dinner of the risk assessment process.

“We’re pleased to be offering pet insurers next-generation solutions that give them the opportunity to retain and grow their customer base profitably, and in the face of increased competition from new market entrants.”

Pet insurers play catch up

While much of the insurance industry has embraced enriched, third-party data to improve risk models and identify additional factors, pet insurers have often lagged in adopting this technology.

In many cases, this has meant struggling to validate the consistency of pet and pet owner information disclosed at the quotation stage, or at the inception of a new pet policy. CRIF hopes to solve this for pet insurers, leveraging new data to maintain and grow their market position.

Pet Check also enables insurers to drill down to the finer details, permitting the underwriting team to assess any discrepancies found with the pet’s owner early in the policy lifecycle, ensuring the policy is underwritten according to the true risk involved. This early detection enhances the customer experience by reducing disputes with genuine customers later at the claim stage.

The solution is specifically designed to support a hybrid approach for insurers looking to minimise the API integration effort. Whilst pet information is automatically submitted via an API, further analysis is possible through an easy-to-use app.

The launch of Pet Check further bolsters CRIF’s market-leading suite of solutions for pet insurers, which includes the first centralised pet claims database and bespoke fraud detection tools and Pet Score – launched in June this year – which is a sophisticated pricing tool based on geographic location.

Firms continue to fall short of imminent Consumer Duty standards in the UK, as Which? research reveals that three-quarters of car insurance customers whose claims weren’t paid in full were not told why.

Which? surveyed over 2,200 car insurance customers and over 1,500 home insurance customers who had made a claim within the last two years in November 2022. In March 2023, Which? also surveyed over 800 travel insurance claimants who had made a claim within the last two years.

When asked about the outcome of their claim, 14 per cent of car insurance claimants reported that their claim was either partially accepted, rejected or in dispute. This was also the case for 22 per cent of home insurance claimants and around 38 per cent of travel insurance claimants.

Fifty-six per cent of home insurance claimants and 43 per cent of travel insurance claimants whose claim was not fully accepted said they did not receive an explanation why that was the case.

Which? explained that the issue goes far beyond causing confusion for insurance customers, lacking the reasoning behind a payout rejection or adjustment also makes it more difficult for the consumer to challenge the decision or make a complaint to the financial ombudsmen.

Sam Richardson, deputy editor of Which? Money, said: “No one wants to be in the position where they have to claim on their insurance – still less have that claim be turned down.

“But not getting an explanation for why a claim hasn’t been accepted in full isn’t just frustrating – it puts you, the consumer, at a serious disadvantage.

“Claimants who don’t get the full picture from their insurers will struggle to take their claim to the Ombudsman, as they don’t have much information to prove where they and their insurer disagree.”

“Insurers need to up their game”

Which? revealed concern for customers whose claims are challenged by insurers, as vagueness from firms makes the process needlessly difficult for those who are not tenacious or confident enough to pursue clarification around claims decisions. The Financial Conduct Authority (FCA) recently reviewed how insurers treat vulnerable customers and warned firms to up their game when it comes to handling claims.

According to the FCA’s review, the number of rejected claims for home insurance reportedly rose by 57 per cent for home insurance and 24 per cent for car insurance between August and November 2022.

In 62 per cent of cases, complaints made to insurers are upheld in favour of the customer. Despite this fact, if a claimant cannot detail where they and the insurer disagree, it can be hard to make a complaint in the first place.

Richardson concluded: “Insurers need to up their game and let claimants know precisely why their claims are not being accepted in full – and as part of its new Consumer Duty, the FCA should clamp down on firms that fall below the required standards.”

Speciality and commercial insurers may be failing to realise the high value of data which could help make better pricing and portfolio decisions; new research commissioned by pricing decision intelligence leader hyperexponential.

A survey of 350 speciality and commercial underwriters and actuaries about insurance technology, conducted by independent research firm Coleman Parkes, reveals that the biggest data issues for insurers largely depend on region.

While not being able to access real-time visibility into portfolios is the leading issue for US respondents, the UK struggles most with difficult processes and internal compliance.

Insurers’ basic technology fails to quickly and accurately ingest and process large datasets.  Ultimately, this issue means that they cannot use this data to generate insights to price risk better.

Overall, around 83 per cent of the underwriters and actuaries surveyed are unhappy with the current technology in place. Only 19 per cent of respondents said they believe their technology enables them to make data-driven decisions.

Pricing may well be what is causing these high levels of dissatisfaction with existing technology at firms. Fifty-six per cent stated their pricing platforms are failing to deliver what was promised, with 45 per cent claiming that although they purchased new pricing technology, they have yet to realise value from it. Hyperexponential explained that this is because traditional pricing tools act as ‘spreadsheet replacements’ rather than as a decision engine.

Failing to accurately price risk and wasting time on admin

Tom Chamberlain, VP of customer and consulting at hyperexponential, commented on the findings: “Pricing decisions are the most important lever insurers can pull on profit and loss, but few have been able to achieve meaningful transformation.

“Today, speciality and commercial insurers have the potential to price and assess risk more accurately than ever before using IoT, drones, social media, dash cams, and wearable technology such as smartwatches. But they still think pricing is just a one-time number when it is so much more than that. Combined with the right data and technology, pricing insights can be used to make better business decisions.

“Our research shows a new generation of speciality and commercial insurers are painfully aware of these shortfallings and those who can embrace modern pricing technology and processes will win out.”

Time-consuming and difficult underwriting processes performed on old technology sees highly-trained and highly-paid underwriters and actuaries wasting valuable time on simple admin tasks.

Underwriters spend around three hours per day on data entry on average. For actuaries, releasing new pricing models takes on average 192 days for US actuaries and 150 days for UK actuaries. The main barrier to underwriting today’s evolving risks, according to respondents, is the risk landscape shifting too rapidly.