Insurtech is starting to deliver value and accelerate the insurance industry's transformation, so if you haven't already now is the time to consider what this technology is all about. Hogan Lovells are at InsurTech Rising this October, and discuss some of the barriers and benefits of this upcoming industry.
It is a time of great change in the insurance sector, with technology ushering in a new era of digital products and services.
‘InsurTech’ offers tantalising opportunities that are waiting to be grasped. But there’s no escaping that these rapid advances in technology also throw up new legal risks and practical questions about how firms can safely capture this potentially game-changing value.
Numerous clients have told us there is a lot of information available on the different DLTs, but a lack of engagement and education concerning the many legal and regulatory challenges that they would face, were they to implement these technologies.
Barriers
The potential benefits of DLT to the sector are many, but it would be unwise for firms to rush headlong into adopting it.
Some of the key issues standing between them and successful implementation include:
- Privacy challenges, with the different incarnations of DLT making analysis under data protection laws challenging;
- International jurisdiction raises concerns, as shared distributed ledgers have no specific location;
- Regulators across the world are taking different approaches to how they regulate DLT, meaning it will be difficult to determine who you answer to and how they will supervise the system going forward;
- Decentralised ownership means no one person is in charge of distributed ledgers and so no central authority is on hand to take responsibility or resolve disputes between participants;
- Governance needs careful attention as DLT is a technology that thrives on collaboration, meaning thought is needed when deciding how to accommodate operational developments, or when responding to legal changes.
Benefits
Our research throws up some important areas where the industry could benefit, including:
- Significant cost and time savings, as well as fraud mitigation, particularly in areas like customer identity checking and AML;
- Simplified underwriting, with automated processes collating and assimilating information;
- New distribution methods, such as peer-to-peer (P2P) insurance;
- Innovative new products, embodied in ‘smart contracts’, which would offer solutions beyond ‘pure loss’ models;
- More efficient and transparent claims handling, with technology limiting the scope for disagreement between parties and offering automatic enforcement of contracts.
Recommendations
In light of these issues, we suggest certain steps as a starting point for any firm looking to use DLT. These include:
- An early review of key legal issues that might apply to your particular service, taking into account your key jurisdictions;
- Keeping a close eye on regulators, who are all beginning to engage with this topic, allowing you to have an informed picture of regulation as it develops.
Next steps
To examine these issues in depth, read and download our new report, Blockchain/DLT in the Insurance Sector.
If you want to take advantage of blockchain's huge potential and disruptive impact, while avoiding falling foul of ever-developing regulatory and legal requirements, visit our Hogan Lovells Engage Blockchain Toolkit.
Hogan Lovells will be at InsurTech Rising. Click here for more on Europe's largest InsurTech event >>