In a bid regulate the use of technology-Insurtech- by the Indian insurance industry, with a strong focus on the protecting the rights and interests of customers, the insurance regulator IRDAI's working group has said that the consent of the customer to share his data is a must for enabling his participation in any business acitivities of insurer.
“The consent should be for specific data and the specific purpose for which it is being obtained. These should be clearly explained to the customer before the consent is obtained.They ought not to share it with anybody without the policyholders’ consent. Where, during the term of a product a customer withdraws his consent, any discount offered for usage of such devices and its output shall be withdrawn,’’ recommended a Working Group that was constituted by the IRDAI to study use of InsurTech by the Indian insurance industry.
The intent of collection of data and usage thereof ought to be part of the product filing with the IRDAI, said the working group that was formed to make recommendations for developing regulatory and supervisory framework in the whole gamut of of InsurTech, including Risk Assessment, Risk Improvement, Product Design and Product Pricing.
In all instances, the security and confidentiality of customer data shall be protected at all costs. Industry level data would only consist of masked data that enables generation of generic queries and reports, said the report..
The use of technology has an impact on product design and the efficiency of inclusive insurance delivery. However, it can pose certain risks.Data capture may pose several concerns and challenges, said the working group’s report.
The working group has further said that the insurers may be allowed to capture data as per their product requirements, but within the scope of insurance and underwriting need. Insurers should be required to mention all data elements that they are planning to capture as part of their product filing process.
However, in order to ensure standardisation of data capture across insurers for creation of a repository of generic data that may benefit the industry as a whole, the basic standard data elements could be worked upon by the General Insurance Council and the Life Insurance Council (for general insurance and life insurance respectively), and recommendations sent to IRDAI in order that such standard data elements may be prescribed by the insurance regulator.
It would be necessary to ensure that portability of customer’s data happens in the event there is a situation of him/her moving from one insurer to another (in the case of short term products such as in non-life insurance/health insurance). An agency such as the Insurance Information Bureau of India could create the required mechanism that would also create a repository for capture of industry level data.
Risk Assessment and Risk Improvement
Risk assessment and risk improvement aspects are operational matters, and indeed, the industry would do good to adopt any technology that facilitates risk assessment and improvement, as long as it is not against the interest of policyholders and the costs are not prohibitive, as it is the policyholder who has to bear the ultimate impact of such costs.
Hence, a cost-benefit analysis before investing in such technology must be carried out keeping the long term objectives in view.
Insurers may be allowed to use technology that aids fraud detection at the point of underwriting and also for assessing the risk – for example, the use of wearables in the context of ‘diagnostics’ for better underwriting.
Product Design and Pricing
Details of usage of wearable/portable devices should be part of the product filing ii. Regulations may need to consider the standards of the devices and their usage.
While doing this, the framework must bear in mind that technology changes very fast – so, only minimum standards should be laid down.
Supply of devices by the insurers should be prohibited
Insurers could be allowed to provide incentives to customer based on their health and activity data captured by the device such as discounts on premium or an additional benefit clearly defined provided the specifics of such incentives are filed with the Regulator as part of the Product Filing Procedure.
Product pricing and premium review could be based on the inputs received from the data captured through the devices.Such products should first be tested in the sandbox environment and as pilot products as may be permitted. It would be of utmost importance to ensure that the interests of policyholders are not jeopardised in any manner as a result of transition from the sandbox environment.
The procedures and documentation set out in the relevant product filing framework for products involving use of portable/wearable devices shall be followed when it comes to the filing of products and the pricing aspects. The existing framework would need to be tweaked to address the filing of such products, bearing in mind the sandbox environment suggested in the form of pilot products.
A provision could also be made to enable insurance companies to add the wearable data pricing option in the existing products, should they find it viable.
However, such a usage has to be with the consent of the insured and should not result in higher premiums or terms and conditions than is allowed currently. But, if customers show improvement, lowering of premium may be considered.
The outsourcing of monitoring and analysis of such data would be subject to the regulations on outsourcing set out by the IRDAI from time to time.
According to the Working Group,there are several types of innovations that fall within the scope of InsurTech – Digital platforms, Internet of Things (IoT), Big Data, Comparators and Robo Advisers, Machine Learning, Artificial Intelligence (AI), Blockchain, P2P, and Usage Based. Apart from Social Media, technologies like IoT, Wearables, Blockchain, AI, Big Data, and Robotic Process Automations, all have their applications.
Some of the members of the Working Group are Yegnapriya Bharath, CGM, IRDAI, (Chairman), V.Jayanth Kumar, CGM, IRDAI, Member, S.P.Chakraborthy, GM, IRDAI, Member, Tapan Singhel, CEO, Bajaj Allianz General Insurance Company Ltd 9. Mr.Ashish Mehrotra, CEO, Max Bupa Health Insurance Co Ltd 10. VV.Balaji, Chief of Technology and Operations, ICICI Pru Life Insurance Co