Innovation in the insurance field : factors that impact the supply of products
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The amount of information detected and available thanks to information technology, the internet and processing tools provides a wealth of data.
With the exponential growth of computer capacity, the multiplication of “smart” algorithms, some companies are now able to better use data to improve their forecasts, especially in the insurance field.
Increase in technological investments in banks through fintech has pushed start-ups to get interested in related financial environments such as insurance.
Guided by research for new openings, they managed to broaden recourse to technologies to other realms of finance, a trend that is at the origin of the attractiveness of insurance investments.
Adding to that, the following technical factors :
- Internet and mobile technology development,
- The growing importance of could, dematerialized storage,
- The impact of digital revolution on users, distribution modes and customer relationship,
- The growing amount of data available which allows increased customization of insurance supply and paves the way for new niche markets,
- The presence of the so-called collaborative economy that insures not only item properties but also their use.
Factors impacting demand for products
Societal changes are having a growing influence on the products available on the market and on their mode of consumption, Customers are bound to use “hi-tech” products, which boost innvoation.
Hi-tech products make it also possible to make better selection of risks and a more refined pricing, hence their competitive edge, which is likely to consolidate customer loyalty.
Cost reduction induced by insurtech has reinforced back office efficiency by mechanizing procedures. Human intervention, which is more costly, is now reduced.
Innovation in the insurance field : intervention of regulators
Insurance uses innovation as a vector of development. This factor is now indispensable in the race for competitiveness. Some innovations are likely to trigger profound mutations in the insurance industry. It is therefore essential for insurance companies to come to grips with this new environment and that supervisory authorities play a decisive role, determining the new economic paradigms at the level of oversight.
It is up to the supervisory bodies to ensure the protection of consumers and the stability of the system. These requirements shall not overshadow the supervisory role which is required to provide players with possibilities to take advantage of the new technologies. The establishment of red lines and barriers is now mandatory for both insurers and insurtech. For some, these limits are regarded as an impediment to the development of innovative activities.
Several States have already introduced procedures and measures designed to promote the development of new technologies in finance such as:
- Establishment of innovation hubs: these entities provide a regulated operational framework that is favourable to innovation.
- Computer safety mechanisms, also called sandboxes: they are a set of resources located within a controlled environment where companies may test their innovations prior to offering the products to customers, all in keeping with the law.
- Public-private partnerships: the authorities set up forums where traditional players may encounter start-ups with a view to exchanging their know-how, experience and the resources at their disposal.