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InsurTech is composed of the words “insurance” and “technology”. It is used as a collective term for the application of modern technologies in the domain of insurance services.
Digital and mobile brokers: FinTechs belonging to this category mostly act as digital insurance brokers and provide users with an overview of their insurance contracts with their respective conditions. Some FinTechs offer very short-term insurance contracts to cover specific cases which can be concluded often spontaneously via mobile devices. Oftentimes additional consulting services are offered.
Internet of things: FinTechs belonging to this category collect data by measuring for example the driving style of the customers or through wearables the customers wear to consult on, offer and/or manage the customer’s insurances.
Introduction
Attitude of the country towards InsurTech-services
The United States has generally embraced InsurTechs, recognising their potential to reshape the insurance industry. State insurance regulators, through the National Association of Insurance Commissioners (NAIC) Innovation, Cybersecurity, and Technology (H) Committee, are engaging with emerging technologies and their impact on the insurance market. This Committee focuses on monitoring innovations and emerging technologies such as blockchain and artificial intelligence. It aims to inform and support state regulators in adapting their frameworks to these new technologies, ensuring that regulations keep pace with industry developments.
Legal affairs
Obligations and requirements to provide InsurTech-services
InsurTech companies are typically subject to the same regulatory framework as traditional insurance entities, such as insurance companies, agencies, brokers, and third-party administrators. Regulation is primarily managed at the state level, in accordance with the McCarran-Ferguson Act. As a result, InsurTech firms face a patchwork of regulations that vary by state. For instance, while some states permit the use of genetic data in life insurance and disability underwriting, others may impose restrictions or outright bans. Despite these differences, there are some common licensing and regulatory requirements that create a degree of uniformity among states.
Additional comments regarding the legal situation for InsurTech-services or what InsurTech’s must be aware of in this business area
The legal landscape for InsurTech companies varies based on their activities, product offerings, and customer base. Insurance underwriting is subject to stringent regulations, while insurance brokerage faces less regulatory scrutiny. Consequently, InsurTech firms may need to obtain multiple licenses depending on their operational territories and the services they provide.
A critical regulatory consideration is that rate setting must be non-discriminatory and backed by actuarial justification. In different jurisdictions, the process for reviewing and approving insurance rates may differ, with some states having specific requirements.