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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
In general, the United States is very welcoming and receptive towards InsurTechs. State insurance regulators have taken steps to better understand how new and innovative technologies are transforming the insurance industry. The National Association of Insurance Commissioners (NAIC), an organisation that provides expertise, data analysis and prepares model laws and regulations, formed the Innovation in Technology and Regulation Working Group (a working group established by the NAIC's Technology and Innovation Task Force) (the Working Group) to monitor and discuss innovation and technology developments in the insurance industry, including the development of resources and materials relevant to the state-based insurance regulatory structure, including new products, services, business models and distribution mechanisms. One of the objectives of the Working Group is to inform and assist state insurance regulators about the innovation taking place within the insurance industry.
Legal affairs
Obligations and requirements to provide InsurTech-services
InsurTech companies generally are subject to the same regulations as all other entities that are subject to insurance regulation (such as insurance companies, insurance agencies/brokers, third-party administrators etc.). These requirements generally are governed at the state level rather than the federal level as clarified by the McCarran-Ferguson Act. Accordingly, InsurTech companies may be subject to a diverse array of regulations depending on the jurisdictions in which they operate. For example, some states may allow the use of genetic data to be used in the life insurance and disability space, while some states may prohibit its use. However, with certain licensing and regulatory requirements, there is some uniformity and consistency among the states.
Additional comments regarding the legal situation for InsurTech-services or what InsurTech’s must be aware of in this business area
The regulations applying to InsurTech companies may vary depending on the scope and territory of the entity’s activities, the products being offered and the customers to whom it is being ordered. For instance, insurance underwriting is extremely heavily regulated, while insurance brokerage is lightly regulated. Thus, the InsurTech may have to acquire various licenses in the jurisdictions where it will offer its products and services.
A major regulatory consideration that InsurTech companies must keep in mind is that the rate setting process cannot be discriminatory, meaning there must be an actuarial justification for a proposed rate. Depending on the jurisdiction in which the InsurTech company operates, the insurer’s rates may vary by state and there may be a different system for review and approval of rates.
Overall, regulators have shown shared concerns with respect to