Column Fin­Tech action plan EU

Regu­la­tion must not stifle the inno­va­tive poten­tial of digi­ta­li­sa­tion

The insurance sector is changing fast to exploit the inherent opportunities of digitalisation: modern IT systems, cloud solutions, new technologies such as artificial intelligence, blockchain or telematics. We need a fair and competitive playing field for FinTechs to ensure entrepreneurs and pioneers have the scope they need to express themselves. The column of Jörg von Fürstenwerth, Chairman of the GDV Management Board.

Insurers are becoming ever more digital. That has been evident from the GDV statistics for some time: in 2013, only just under one-in-eight property and casualty (P&C) customer issues underwent a fully automated process from beginning to end and now it's one in four. Life insurance tells a similar story as the proportion of fully automated processing has risen from four to eleven percent of cases. The growth of automation has sped up the customer-enquiry process.

German insurers spent EUR 4.45 billion on IT in 2017

That evolution is ongoing: last year German insurers received, for the first time, more e-mail than postal correspondence from customers. No wonder: in 2017, German insurers spent EUR 4.45 billion in total on IT, and annual expenditure is now about 11 percent higher than it was five years ago.

And internationally? Figures from RPC Consultancy indicate that the number of patents submitted for insurance-related innovations worldwide has increased markedly in recent years – this trend stems from the growing impact of new, digital technologies.

We need to exploit all the opportunities of digitalisation to benefit our clients. InsurTechs represent a new competitor category in the industry. They will not replace traditional insurers but they can quickly take ownership of market niches.

Let us not forget that established insurers have impressive strengths, which it is practically impossible for newcomers to emulate in the short term, for example knowledge of the entire value chain, experience with regulatory requirements and, last but by no means least, financial clout.

The GDV supports the EU Commission FinTech Action plan

At the same time, that is no reason not to actively prepare for the future. We need a fair and competitive playing field to ensure entrepreneurs and pioneers have the scope they need to express themselves. Many insurers already operate their own innovation labs, are setting up venture capital funds or founding start-ups. That is why we support the EU Commission Action plan, which aims to make Europe more FinTech-friendly and able to maintain its competitive position.

There are seven key points of relevance to German insurers, which we address in detail in a new position paper:

  1. Consistent use of the proportionality principle: Differentiated regulation must be possible to exempt low-risk insurers from unnecessary bureaucracy and free up resources for innovation.
  2.  A level playing field for established insurers and InsurTechs: Market success must come from offering good products and services to customers. Market distortions through unjustified regulatory differences must be avoided.
  3.  Regulation must be technology-neutral: That means, for example, communicating with customers by e-mail or a messaging service must not be hindered by excessive data protection requirements. All processes should be allowed to run smoothly, securely and without media disruption via electronic channels.
  4.  Regulation must not become excessive: Simply adding more regulation is not constructive, good regulation must ensure a high level of security and financial stability, while also permitting growth and innovation. Or to put it another way: as much as necessary, but as little as possible. Insurers know only too well where excessive bureaucracy can lead from their experiences with Solvency II.
  5. Harmonise and streamline the rules for cloud computing in Europe: Europe is well placed to become a leading location for this technology because of its high data protection standards, although the regulatory environment is still too complex and, most of all, fragmented.
  6. Align European cybersecurity rules before thinking about new requirements: In an increasingly interconnected world, the threat of cybercrime will continue to increase. The insurance industry stands ready to contribute its expertise and products towards resolving this problem. However, to do that, they need a coordinated approach between the European supervisory and security authorities.
  7. Non-discriminatory access to data: New data is part of the connected world. Take the automobile as an example: we need to clarify as soon as possible who will be allowed to access the new data from connected motor vehicles. The position of the German motor insurance sector is clear: the data does not belong to the producers but to the motorists themselves. They must have full control over the data and be able to decide whether, when and to whom to send such data, or from whom and when they wish to receive which service.

Start-ups are already part of our association. Other InsurTechs have expressed an interest in joining. This is not surprising as their objectives do not differ from the rest of the industry as much as one might think. Regulation makes the support of a strong association indispensable. For example, it beggars belief how hard it is to get away from paper forms and personal signatures in insurance. It’s just the same for traditional insurers as for newcomers.

Sincerely yours

Jörg von Fürstenwerth

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