When I first started writing this blog a few weeks ago, I never, ever thought the first quote that I used would be from Donald Trump, but here we go…
Last week, during his speech to the UN, President Trump said the following:
‘All responsible leaders have an obligation to serve their own citizens, and the nation state remains the best vehicle for elevating the human condition. But making a better life for our people also requires us to work together in close harmony and unity, to create a more safe and peaceful future for all people.’
Daily Fintech is not a political site and I will focus on Insurtech and financial services regulation within this post. Although I have used a quote from Trump, this does not make me a supporter of him or his policies.
There has been a trend recently in the world with countries looking inward towards expanding their own economic priorities (i.e. Brexit). I’m not going to debate whether this is right or wrong. Looking at the end of Mr. Trump’s quote ‘making a better life for our people also requires us to work together in close harmony’, I find this to be the most interesting as it relates to our industry.
As mentioned in my first post, I have lived and worked in the US, Europe and Asia. Each place I lived in had many differences, but a lot of similarities too. Within the insurance and financial services industry, the differences between product offerings and services in different countries primarily comes down to customer preferences and savviness. However, the high level concerns that customers have when investing in an insurance or financial product are quite similar in almost all markets exist:
- Will the financial institution, either insurance company or bank, become insolvent? And what sort of laws are in place to ensure the financial institution does not do something irresponsible with my money?
- How are brokers/agents remunerated and does this drive bad behavior?
- What sort of data is being collected on me, how is it being collected and how will it be used?
- Am I getting good value for money?
The answers to these questions may be different, depending on the market. They do form some of the fundamental questions that customers will have before making a decision to purchase.
This is where regulation comes in. Regulation is there to help give customers peace of mind in saying ‘I know this big financial institution I am investing in has some rules governing it, and even though I may not understand this annuity/Insurance policy/ETF/fund, etc, I feel safe in knowing that there are laws that protect me.’
When I was living in London, the Retail Distribution Review (RDR), was coming into effect. While in Malaysia, the LIFE Framework was announced, which had a lot of similarities to FAIR in Singapore. Not too long after this, the DOL Proposed Fiduciary Rule was released. All of these were aimed, in some way shape or form at protecting consumer’s interest and enhancing the industry proposition in these respective markets. I remember thinking at that time, ‘if these regulators just got together to discuss this, find out where the commonalities and differences are, then maybe they can help each other within their own regulations and probably gain from some lessons learnt in countries who have walked this path before them.’
Then, this week, I saw some news which gave me some hope:
While I do have my reservations on the US and EU agreement and the statement regarding reinsurance to ‘eliminate collateral and local presence requirements for EU and U.S. reinsurers operating in each other’s markets,’ all of these collaborations represent a growing interest by regulators to understand quickly growing disrupting market forces, in an effort to protect the customer.
Many of the innovations we are seeing in both Fintech and Insurtech are amazing, and will provide for a differentiating proposition and experience to customers than we see today. However, many of these technologies are advancing at a speed much quicker than regulation can keep up with. Depending on the market, and existing regulation in that market, new offerings can come to the market without even the need of being looked at by the regulator; meaning new financial solutions could be available to customers that have no protection to them whatsoever. There have always been these kind of alternate solutions available, however in the age of accelerations and digital economy we are living in, these can be launched, marketed and distributed faster than ever before. As such, it is important for regulators to not look inward only to what they are experiencing in their home market, but also what is happening abroad. The International Association of Insurance Supervisors, could help with this. From my experience, regulators are learning about innovation and are generally quite open and receptive to it. Now the real question is what are some of the tangible first steps that can be taken to enhance and promote innovation? This can help to avoid an Uber type situation in insurance where startups are forced to look for loopholes and other ways to do it, in spite of regulation.
With platforms like Open Source Initiative, people can collaborate and share ideas worldwide. As such, it would make sense that regulators stay on top of developments in other countries, so from an Insurance and Financial services standpoint, we can, as Mr. Trump so eloquently puts it, ‘create a more safe and peaceful future for all people.’
Look forward to seeing many of you next week at Insuretech Connect!
Stephen Goldstein is an experienced Insurance executive and Insurtech dealmaker with a core focus on growing revenue, launching go to market initiatives and advising industry leaders.
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