Digital innovation
Rapidly increasing technological and digital innovation in the financial sector (“FinTech”) will have far-reaching effects on the insurance sector. FinTech presents significant opportunities for financial inclusion and policyholder value yet also poses conduct and operational risks. The rapid expansion in alternative data sources and advanced data analytics has particular impact and has the potential to disrupt the insurance market. Digital innovation is a strategic theme as part of the IAIS Strategic Plan 2020-2024 and will continue to be a strategic theme in our plan for 2025-2029. The main focus of the IAIS’ activities in this area are around sharing supervisory practices and providing a platform for exchange of experiences and insights.
Supervisory practices
In 2020, the IAIS published an Issues Paper on the Use of Big Data Analytics in Insurance (see below), which explores benefits and risks for consumers resulting from the increasing use of big data analytics by insurers. The paper acknowledges the significant benefits of advanced data analytics, including improved risk selection and pricing, more personalised and affordable insurance products, increased choices and more efficient servicing for customers. The paper also cautions that the growing use of complex algorithms and expanding ability of insurers to access more data could create or amplify specific risks that may warrant heightened vigilance from supervisors.
Supervisors are called upon to consider collaborative and proportionate responses to these issues, maintaining a balance between supporting innovation and ensuring fair and responsible deployment of technology across the insurance value chain.
FinTech Forum
The IAIS FinTech Forum is a virtual forum of technical experts from the IAIS’ diverse membership. It serves as a platform to share practical insights and experiences on FinTech-related developments influencing the insurance sector and insurance supervisors globally.
The FinTech Forum established three dedicated workstreams to conduct targeted surveillance on the deployment of the following technology applications across the insurance sector. In December 2022, the IAIS published a report (see below) that presents the outcomes of exploratory, deep-dive analysis on these topics:
- Safe, fair and ethical adoption of artificial intelligence (AI) and machine learning (ML) and the use and governance of data
- Application programming interfaces (APIs) and open data
- Distributed ledger technologies (DLTs) and blockchain
Recent and upcoming events
- 13 December 2024: A public background session will be hosted by IAIS FinTech Champion, Petra Hielkema. Registration is now open
- Until 17 February 2025: Consultation on draft Application Paper on the supervision of artificial intelligence
- 10 July 2024: Global Seminar panel on artificial intelligence in the insurance sector
In 2023, the FinTech Forum developed two members-only reports on the application of decentralised finance (DeFi) in insurance and on AI/ML supervisory practices. These reports are part of the FinTech Forum’s ongoing efforts to facilitate knowledge exchange and promote better understanding among supervisors on FinTech-related topics. The IAIS also published a short summary of its ongoing work on AI/ML in December 2023 (see below).
During 2024, the FinTech Forum continued to review FinTech-related developments and promote convergence and support supervisors in responding and keeping pace with these trends.
The IAIS is currently consulting on a draft Application Paper on the supervision of artificial intelligence. This Application Paper reinforces the importance of the Insurance Core Principles (ICPs), outlining how existing expectations around governance and conduct remain essential considerations for supervisors and insurers using AI. Furthermore, noting that AI can amplify existing risks, the paper emphasises the importance of continued Board and senior managers education to establish robust risk and governance frameworks to ensure good consumer outcomes. Additionally, the paper notes that increasing application of AI can heighten the role of third parties like AI model vendors. Consistent with existing ICPs, this paper reaffirms that insurers remain responsible for understanding and managing these systems and their outcomes.
Partners
Together with the A2ii and FSI, the IAIS also published in December 2022 a public note (see below) on key trends and developments relating to the deployment of Supervisory Technology (SupTech) by insurance supervisors. This note is partly based on the outcomes of a member survey of supervisory responses to FinTech developments.