Regulators around the world are struggling to keep pace with change in the insurance sector, an expert has said.
With insurtech dominating discussions both inside and out of the insurance industry, challenges are arising as regulation tries to keep pace.
Padraig Walsh, a partner at law firm Bird & Bird, said that regulators in Australia and beyond struggle to keep pace with innovation as they rarely look forward. This short-term view can create challenges.
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“Regulators never keep pace with technology because the innovation happens faster,” Walsh told Insurance Business. “The perspective of a regulator is always the eyes in the rear-view mirror rather than on the windscreen ahead.”
Many in the industry have said that the reason insurance has been more sheltered from technological change compared to other areas in the financial services sector is because of protection offered by regulation.
The balance between regulation, consumer protection and technological development is a difficult one to strike and Walsh noted that, in future, the best way for legislation and regulation to be set-up is for it “to be enabling so that the regulator is able or empowered to regulate by guideline and policy because that would be easier to change”.
As fintech sandboxes are launched around the world, Walsh said that different geographies will compete to become the go-to location for fintech and insurtech development.
“If a country or a location creates an environment that allows that innovation to be harnessed, assessed from a regulatory point of view, but harnessed, tested and then released effectively to market then that location will take a lead in respect of a regional development hub for insurance technology,” Walsh continued.
Walsh said that regulation will play an important role in the further development of insurtech as both disruptors and incumbents alike strive to make changes.
“Technology is neutral but how technology is used is how the risks and the benefits arise - and regulation is the weighing scales in between,” he said.
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