Insurtech

Last Updated: 7/3/2024

Issue: The very nature of the business of insurance is transforming, driven by technological advancements and socio-economic trends. Emerging technologies—like big data , the Internet of Things (IoT), mobile technology, artificial intelligence (AI), wearable devices and blockchain —are revolutionizing the insurance industry and changing consumer expectations and preferences. Consumers are increasingly well-versed in new technologies and looking for a more hands-on approach to managing their finances and purchasing insurance products. 

Consequently, technology-enabled innovations in the insurance industry, or InsurTechs, have emerged to offer simpler products and streamlined customer experience. The Insurtech sector continues to gain momentum and garner attention from both venture capital (VC's) and established insurers. State insurance regulators have taken numerous steps to better understand how new and innovative technologies are transforming the sector. The NAIC formed the Innovation and Technology Task Force in 2017 to monitor technology, data collection and cybersecurity developments in the insurance industry. 

Background: InsurTech can be described as the innovative use of technology in insurance and is a subset of FinTech, or financial technology. FinTech has transformed the banking world (e.g., Square, one of the most recognized FinTechs, offers mobile payments with innovative smartphone card swiper technology) and now InsurTech is altering the business models and competitive landscape of the insurance industry. InsurTech activity has increased significantly over the last few years and continues to attract significant attention. Deloitte estimates InsurTech startups have attracted $16.5 billion in investments over the past decade, and the first three quarters of 2021 saw more investment in InsurTech than 2019 and 2020 combined.

InsurTech innovation is occurring across the entire insurance value chain—from distribution and marketing, product design, underwriting, claims management and balance sheet management and across all lines of insurance—property and casualty, life and health. InsurTech startups are reaching customers through new distribution mediums—addressing shifts in the way people communicate, access information and make decisions—while not disturbing traditional channels. 

New innovations are constantly emerging and state insurance regulators do not wish to stand in the way. Instead, they want to work closely with innovators to make sure laws and regulations are being followed and consumers are not being harmed. The NAIC Innovation and Technology (EX) Task Force was established to help insurance regulators stay informed on key developments. This includes new products and services from startup companies, as well as established insurance industry players. The Task Force marks an important step in state insurance regulatory efforts to increase engagement in new and innovative technologies. 

The Task Force meets regularly to learn more about innovative insurance solutions. In 2021, the Task Force appointed a new E-Commerce Working Group to develop a work plan designed to address suggestions and recommendations submitted regarding relaxed or “accommodating” regulatory relief associated with the COVID-19 pandemic. In addition, state insurance regulators, through the Task Force, are focused on several regulatory areas where innovation may be meeting obstacles like anti-rebating laws, the cancellation notice process, and e-signatures. 

Task Force members and other regulators also regularly participate in a variety of settings to further the dialogue.  This includes the NAIC Insurance Summit, where the NAIC and CIPR host sessions dedicated to educating the public about how emerging technologies are impacting the insurance industry. In 2021, the Task Force met at the NAIC Summer National Meeting to hear presentations on Colorado’s legislation related to big data and AI oversight, discuss consumer data ownership issues and potential guidance, and receive updates from other committees and working groups working on innovation and technology-related issues. NAIC Task Force members have also hosted a film screening of “Coded Bias”, and a panel discussion of big data and AI.