Current and Emerging Trends in the Insurance Sector Nikki Hall, CIPR Manager July 2018

About NAIC Center for Insurance Policy and Research (CIPR) Established in 2009 Research “think-tank” Five primary work streams Quarterly Newsletter Live Events Webinars Website/A-Z Key Issues Studies

CIPR’s Mission The Center for Insurance Policy and Research (CIPR) leverages NAIC resources to collect and analyze information for use by officials, agencies, and policymakers in the U.S. and abroad. Through seminars, presentations and publications, CIPR efforts enhance: Cooperation between federal, state and international agencies and regulators; Comprehension of insurance-related topics and issues by thought leaders; The exchange of information between the states and the federal government; and NAIC and state regulator participation in public policy decisions affecting insurance and the broader financial services sector.

CIPR Website Go-to source for insurance information. The website provides information on current and emerging insurance regulatory developments, ongoing CIPR projects, and coverage of a wide-range of insurance industry topics. cipr.naic.org

Disruption is all around us 5

Current and Emerging Trends Artificial Intelligence /Machine Learning Big Data Sharing Economy Demographic shifts Future Autonomous Vehicles Internet of Things (IoT) Digitalization Insurance Ecosystem Peer to Peer Blockchain

Innovation & Emerging Technology

Innovation & Emerging Technology Big Data and emerging technology are changing how many insurers do business. The amount of consumer data has grown exponentially in just a few years with the use of smartphones, wearables, social media, etc. Challenges Regulatory landscape does not provide much flexibility for new concepts You normally don’t hear “innovation” and “insurance” together The insurance industry is often seen as slow to change because it is complex and has high barriers to entry New entrants often find the regulatory environment confusing and difficult to navigate.

The Rise of InsurTech The acronym “InsurTech” comes from the combination of the words “Insurance” and “Technology” This term is thought of as the innovative use of technology in insurance. It often refers to the use of technology innovations to provide customer conveniences, improve speed, provide higher levels of customization, and increased quality of service. Although “InsurTech’s” are often referred to as “disruptors” of traditional insurance business models, most of the time they are enablers rather than disruptors, as they offer products and services that help insurers and reinsurers improve their process to better serve customers. Socio-economic Trends: In 2015, there were more than 75 million millennials in the U.S. The millennials are well versed in new technologies and looking to take a more hands‐on approach when it comes to managing their finances and purchasing insurance products. Consequently, technology‐enabled innovations in the insurance industry, or “InsurTechs,” have emerged to offer simpler products and streamlined customer experience, catering to a growing generational shift toward millennials.

InsurTech by the Numbers CB Insights

New Ecosystems

Challenges for Regulators The pace of innovation Applying regulations and laws on the books to new innovations Supporting innovation while protecting consumers Challenges Regulatory landscape does not provide much flexibility for new concepts You normally don’t hear “innovation” and “insurance” together The insurance industry is often seen as slow to change because it is complex and has high barriers to entry New entrants often find the regulatory environment confusing and difficult to navigate.

NAIC Activity NAIC Innovation & Technology (EX) Task Force Its mission is to provide a forum for discussion of innovation and technology in the insurance sector, to monitor technology developments impacting state insurance regulatory framework, and to develop regulator guidance as appropriate. Three existing groups report to this Task Force: Cybersecurity Task Force (disbanded) Big Data Working Group Speed to Market Task Force In continuing NAIC’s commitment to leading edge technology, the Task Force was formed to provide a forum for discussion of innovation and technology and will include facilitating education as well as monitoring new developments in this area.  We expect educational opportunities will be identified through this group and much of the learning to take place as educational workshops with stakeholders in this area.

NAIC Activity (Continued) The Task Force will also monitor emerging technology (e.g., blockchain and artificial intelligence) as well as innovation encouraged by InsurTechs. Regulators are meeting with InsurTech Accelerators. Regulators are meeting with Start-Ups. Regulators are discussing the concept of a regulatory sandbox. Regulatory Sandbox To help entrants overcome regulatory hurdles a number of countries have developed a “regulatory sandbox” A safe space for InsurTechs to seek regulatory guidance, test their ideas and experiment with innovative products or services in the marketplace Some have requested that the NAIC through the Innovation and Technology Task Force create a sandbox. At this point, we’re opting to learn more about what regulatory obstacles InsurTech’s are facing

CIPR Innovation Focused Events NAIC Summit (June 2018) P2P Car Sharing Issues Webinar (July 2018) NAIC National Meeting (Aug. 2018) CIPR event “Can Regulation Keep up with Innovation” NAIC/Stanford Joint Cyber Event (Oct. 2018) Autonomous Vehicle Forum (Oct. 2018)

CIPR Innovation – Past Events and Research Webinars: The Use of Drones in Insurance Wearables and Their Implications in Insurance Understanding Blockchain Technology The Sharing Economy Articles: Swipe Right for On-Demand Insurance The Growing Impact of Wearable Technology How AI is Changing the Insurance Industry How InsurTech is Reshaping the Insurance Sector

Thank you! Contact Information: Shanique (Nikki) Hall Shall@naic.org 212-386-1930