As insurtech companies proliferate and gain client base – and insurance clout – regulators have to keep informed of the technology, in order to adapt legislation where necessary.
New tech companies often operate in different ways than incumbent insurers. And for regulators, it can be a challenge understanding all the technological advancements happening within the insurtech space.
So that’s why, in April, the National Association of Insurance Commissioners (NAIC) set up an Innovation and Technology Task Force to help educate state regulators.
NAIC president Ted Nickel told Insurance Business in April, not long after establishing the taskforce, the NAIC needed to keep on top of technological changes and how they impact the industry – lest the technology overwhelm regulators.
“It [the establishment of the taskforce] is an attempt to wrap our collective arms around the issues and better inform existing regulators and new regulators and better understand what is going on – because I could see a real easy scenario where the US regulatory side is overwhelmed by some new technology,” he said.
The webpage for the taskforce reads: “The mission of the Innovation and Technology Task Force is to provide a forum for regulator education and discussion of innovation and technology in the insurance sector, to monitor technology developments that impact the state insurance regulatory framework, and to develop regulatory guidance as appropriate.”
And changes are already in play. When upstart insurtech Lemonade hit a snag launching its services in Florida, the company successfully lobbied for legislative changes there.
Lemonade co-founder Shai Wininger said last week – in a provocative blog that took aim at his more traditional insurance opponents – that the company had helped pass what he titled “The Lemonade Act”.
“When you’re a new kind of insurance carrier, launching in a new state is tough. Even when the regulators are willing, as was the case in Florida, the law doesn’t always oblige,” he wrote. “Insurance laws were written for the old insurance industry, creating barriers for disruptive companies. So when we hit a wall with Florida’s law, we worked with the Florida Senate to change it, and it worked!”
Scott Morris, chief technology officer at the NAIC, said the taskforce’s main role is making sure insurers aren’t inhibited in their development – while protecting consumers.
“There is a lot going on in this space,” he said. “Everybody is aware that some of this stuff looks pretty good on the surface, but I think what they want to do is dig down and see what the challenges are in protecting consumers. Everybody likes a good app.
“Regulators understand that there are benefits to innovation, but they’re cautious to look at what’s going on … and is this just a new way to acquire customers or is this a completely new concept, is it truly innovation?”
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