CU-MCOM-SEM-III-Banking and Insurance

algorithms for underwriting purposes) and changes in corporate governance frameworks arising from third-party collaboration with insurtech companies.  Supervisors need to consider whether current reporting requirements adequately allow the monitoring of trends and the potential build-up of risk arising from new technologies.  Supervisors need to consider the impact of fintech innovations on consumer protection and the extent to which customers are treated fairly. For example, in the use of artificial intelligence and robo-advice technologies, safeguards should be in place to ensure that the advice and services provided are suitable and affordable for the customer.  Supervisors need to establish cooperation and collaboration mechanisms with stakeholders, including supervised institutions and their associations, other market participants, academics, financial regulators and other authorities whose frameworks apply to fintech innovations, such as telecommunications or data protection agencies.  Supervisors need to examine whether their supervisory tools and IT infrastructures need to be improved since technological innovation also offers opportunities for supervisors to automate certain supervisory processes and compliance requirements.  Supervisory staff may need to acquire new technical skills to understand innovations and identify the associated risks. There is a need for supervisors to attract and retain talent with the relevant skillset. 12.3 SUMMARY  It appears that FinTech businesses in Insurance (InsurTech) are developing business models that may, in fact, better address the insurability of policyholders by using technology to simplify the contracting process, and tailoring policies to better suit their needs. There is also scope for insurance to adapt to wider changes in economic activity, such as the sharing economy and the large millennial cohort. The other striking characteristic of many InsurTechs are the social and environmental considerations that their business models incorporate. Many of the InsurTechs try to improve the transparency of the contracting as well as the claims management process, including fraud detection, providing greater clarity to where the premiums paid go, which could have an impact on the wider insurance industry.  There also seems to be a wider recognition that the fine print of an insurance quotation is tedious to read, without giving much insight into the actual coverage of the policy for retail clients. Sites are being developed that simplify the information on coverage of a policy and try to clarify the level of premiums, while 151 CU IDOL SELF LEARNING MATERIAL (SLM)

introducing peer pressure for risk mitigation. There is often an algorithm to carry out the risk assessment using a few questions which may also use external data sources to assist the assessment.  The scale of InsurTech investment is growing, and by (re)insurers in particular. As InsurTechs start to attract a large number of users/policyholders, and provide an improved customer experience, (re)insurers will likely hope to capitalise on the success of such start-ups by having a stake in them. A number of (re)insurers have created strategic venture capital arms for this purpose, and have been making strategic investments in a number of start-ups.  Some countries are establishing regulatory platforms, such as the regulatory sandbox approach, that allow innovative technologies to enter the market, and this will assist in encouraging start-ups to develop their business model while becoming acclimatised with regulatory requirements. Start-ups may opt to initiate their business in markets which have such a ready platform.  More broadly, these technologies have the potential to bring better and more customised insurance coverage to more people, including those in the lower income bracket, and bring greater financial protection. In addition, the new distribution models can simplify the insurance process, and bring insurance to less developed markets. 12.4 KEYWORDS  InsurTech stands for insurance technology and represents a broad category of fintech’s and other technologies used in the insurance industry.  Fintech: It is a combination of two words- “Financial and Technology”  PFM (Personal financial management): It refers to the software which helps in managing the money of the individuals.  Cryptocurrency: A cryptocurrency is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions.  Crowd investing: It is the term given where a large group of people or the crowd, co-invest in people or business through online. 152 CU IDOL SELF LEARNING MATERIAL (SLM)

12.5 LEARNING ACTIVITIES 1. Find out how Artificial Intelligence is used in any two Financial Institutions for insurance products? ________________________________________________________________________ ________________________________________________________________________ 2. Find out how crypto currency will impact the Indian Financial Industry. ________________________________________________________________________ ________________________________________________________________________ 12.6 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What is FinTech? 2. What is Personal financial management (PFM)? 3. What is Reward Crowd Funding? 4. What is the potential impact of innovations in the insurance business? 5. What are the Challenges for Insurance Supervisors? Long Questions 1. Explain about Fintech Industry Segment (Financing) 2. Explain about Fintech Industry Segment (Asset Management). 3. Explain about Fintech Industry Segment (Payments) 4. How Do Fintech Developments Impact Insurance Businesses? 5. What are the Challenges for Insurance Supervisors? B. Multi-Choice Questions 1. _____________is used for charities or for a particular cause. Here donations are given in expectation to nothing in return except satisfaction. Donation based Crowd Funding. a. Crowd Financing b. Crowd Investing c. Crowd Funding 153 CU IDOL SELF LEARNING MATERIAL (SLM)

d. Crowd Lending 2. helps businesses and private individuals to secure loans from the public. It provides a platform for both the lenders and borrowers. a. Crowd Financing b. Crowd Investing c. Crowd Funding d. Crowd Lending 3. Abbreviation of IAIS ______________ a. Indian Association of Insurance sector. b. Indian Association of Insurance supervisors. c. International Association of Insurance supervisors. d. International Association of Insurance sector. 4. _________ is the term given where a large group of people or the crowd, co- invest in people or business through online. a. Crow Investing b. Group Investing c. Crowd Funding d. Crowd Saving 5. FinTech businesses in Insurance means. a. Insurance Tech b. Insurtech c. In Tech d. None of these Answers: 1 - c, 2 – d, 3 - c, 4 – a, 5 - b 154 CU IDOL SELF LEARNING MATERIAL (SLM)

12.7 REFERENCES  Risk Management and Insurance: Perspectives in A Global Economy by Harold D. Skipper, w. Jean Kwon, Blackwell Publishing & Wiley India  Risk Management & Insurance, James S. Trieschmann, Sandra G. Gustavson, South western, 1998 155 CU IDOL SELF LEARNING MATERIAL (SLM)