Regulators looking to step up scrutiny of insurers & insurtechs: Clyde & Co

Looking ahead into the coming year for the insurance market, Clyde & Co states that regulators will look to step up scrutiny of insurers and insurtechs in order to protect consumer interests.

Whilst insurers have traditionally relied on the collection of information from insureds through proposal forms to assess risks and to set prices for policies, in an “increasingly connected world”, a remarkable amount of data is now collected from prospective insureds from alternative sources including wearable technology.

Avryl Lattin, a corporate regulatory partner at Clyde & Co’s Sydeny office, states that while this may lead to innovation in product design and distribution by insurers and insurtech ventures, these forms of data collection are also likely to “attract greater regulatory scrutiny,” which includes potential anti-discrimination concerns from regulators.

Lattin explained that Clyde & Co’s expectation is that the increased provision of data from insureds through technology-based data points will be the focus of greater regulatory attention, “as the evolutionary shift in distribution models in the insurance industry gathers pace”.

At the same time, regulators are likely to ramp up their protection of consumer interests, in order to ensure that data that is collected from such sources is not misused to discriminate or exclude insureds.

Moving forward, Lattin highlighted how across Australia, there has recently been a rise in regulatory action against insurers in the context of mental health exclusions in insurance policies.

This is where some insurers have been found to have been non-compliant with Australian anti-discrimination laws.

“There is a partial exemption which provides that discrimination in underwriting is not unlawful if it is based on actuarial or statistical data on which it is reasonable to rely, unless there is no such data available,” Lattin said.

In addition, Lattin noted that insurers who have fallen outside of the scope of the partial exemption have not yet been able to demonstrate to regulators that they relied upon such data at the time of underwriting.

As a result. this trend illustrates the practical difficulties of complying with the partial exemption for insurers and can be seen as a warning for insurers and insurtech ventures as channels of data collection evolve.

Lastly, Lattin suggested that insurers will need to implement processes which ensure that data being sourced from innovative technological channels is being appropriately utilised in the underwriting of insurance products. This is to ensure that it falls within the scope of exemptions under anti-discrimination legislation.

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