New technologies and their impact on financial services, including insurance, are of ‘great interest’ to ASIC but it remains cautious, particularly around the risks to consumers.
When it comes to insurtech, it’s still a bit of an unknown “but there’s obviously enormous potential”, ASIC Deputy Chair Peter Kell told IRP.
“We are talking to insurers about how they see their products evolving,” he says.
“We’re very interested to have dialogue with industry about what they are seeing happening … whether it is going to allow new entrants, who they might be, whether it would allow existing players to provide better products …”
Technology has the potential to improve consumer experience, Kell points out. For example, with product disclosure, technology could facilitate better understanding; or with product distribution, online access might allow consumers to more readily check their policies.
However, it’s about balancing the benefits with the risks. One potential downside that he notes are online comparison sites that focus on price over coverage. “You could have people making poor decisions about the sort of products they should be purchasing,” he notes. “We can see that that has happened in the UK. We don’t think it has been that much of an issue here but we want to make sure that those sorts of potential risks are managed as well.”
“Our view is that competition is a good thing and they can help consumers choose but you have to be careful that you don’t end up in a situation where it becomes one-dimensional and consumers think that the cheapest product is in each and every circumstance going to be the best if they haven’t thought about or fully understood that it is cheaper for other reasons.”
Kell explains: “It is ASIC’s belief that the innovation has the potential to really improve the efficiency of the financial system both at one end when you are talking about market infrastructure through to the day to day choices that ordinary retail customers have, for example, online banking or accessing services to allow them to compare and shop around. That’s all of benefit.
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“But there are also risks that we want to make sure that we cover and these include the risks that consumers may not understand the new products and may end up choosing the wrong one. And frankly, in some cases, the intermediaries offering them may not themselves fully understand the products either.”
Kell points further to cyber risks, including scams or systems break downs that have to also be considered. It’s a “balance”, he says, to “minimise those risks while enabling the potential benefits of innovation to flow”.
Check out this month’s Insurance Adviser for an exclusive interview with Peter Kell about what ASIC has in store for the insurance industry.