THE EUROPEAN INSURANCE AND OCCUPATIONAL PENSION AUTHORITY (EIOPA) LAUNCHED A PUBLIC CONSULTATION ON A ‘DISCUSSION PAPER ON (RE)INSURANCE VALUE CHAIN AND NEW BUSINESS MODELS ARISING FROM DIGITALISATION’

Technology continues to evolve, bringing new opportunities, social change and new expectations for consumers. That’s why insurance undertakings and intermediaries continue to develop and revise their business models, often in increased co-operation with third parties (e.g. BigTech companies and start-ups), bringing both beneficial innovation and a new set of emerging risks that have to be taken into account. The objective of this consultation is to understand the advantages, opportunities and risks of market players’ dependence on the outsourcing of innovative projects.

These changes in firms’ reliance on out­sour­cing and third par­ties bring poten­tial bene­fits and opportunities. 

The dis­cus­sion paper  gives examples of co-ope­ra­tion with third par­ties, high­ligh­ting the fact that Insur­Tech start-ups are often part­ne­ring with incum­bents (both insu­rers and inter­me­dia­ries). This part­ner­ship is bene­fi­cial to both sides : it allows incum­bents to bene­fit from cut­ting edge tech­no­lo­gy while star­tups can bene­fit from incum­bents’ cus­to­mer-base – this is par­ti­cu­lar­ly impor­tant for insu­rance inter­me­dia­ries as they often have an esta­bli­shed per­so­nal rela­tion­ship with consu­mers – mar­ket know­ledge, and regu­la­to­ry expertise. 

Fur­ther­more, Insur­Techs acting as inter­me­dia­ries and ini­tial points of cus­to­mer contact, such as com­pa­ri­son por­tals and sites that offer finan­cial advice or contract mana­ge­ment func­tio­na­li­ties, seem to be most favou­red co-ope­ra­tion part­ners. Incum­bents are also increa­sin­gly part­ne­ring with autho­ri­zed insu­rance inter­me­dia­ries to dis­tri­bute pro­ducts in new ways (e.g. via mobile apps and chatbots). 

Never­the­less, co-ope­ra­tion with third par­ties also create new risks, as conduct and pru­den­tial risks, legal and com­pliance issues or even concen­tra­tion risk if a large num­ber of under­ta­kings and inter­me­dia­ries become dependent on a small num­ber of domi­nant out­sour­ced or third par­ty ser­vice pro­vi­ders. In this context, a pos­sible frag­men­ta­tion of the insu­rance value chain could occur, inclu­ding, most per­ti­nent­ly, a poten­tial for a redu­ced regu­la­to­ry and super­vi­so­ry ‘grip’ on the rele­vant acti­vi­ties in the value chain. The goal of the public consul­ta­tion is the­re­fore to get a bet­ter pic­ture on pos­sible frag­men­ta­tion of the Euro­pean Union’s insu­rance value chain and super­vi­so­ry chal­lenges rela­ted to that in order to plan for next steps. 

As a conse­quence, super­vi­sion requires more atten­tion to dif­ferent com­pa­nies invol­ved throu­ghout the value chain.

The dead­line for sub­mis­sion of feed­back in EU Sur­vey Tool is 7 Sep­tem­ber 2020.


Source : https://www.eiopa.europa.eu/content/discussion-paper-reinsurance-value-chain-and-new-business-models-arising-digitalisation_en