UK: Pinsent Masons Insurance Briefing - ANALYSIS: Insurers Are Waking Up To Cost Saving And Efficiency Potential Of Blockchain And Smart Contracts

Last Updated: 13 July 2017
Article by Colin Read, Nicholas Bradley and Alexis Roberts

Welcome to Insurance Briefing - a new fortnightly round-up of insurance legal and business developments published on Out-Law - with analysis and commentary from the insurance team at Pinsent Masons.

The seven topics of focus this week include:

ANALYSIS: Insurers are waking up to cost saving and efficiency potential of blockchain and smart contracts

Most people know blockchain as a payments technology but insurers are beginning to put it to use to cut costs and to improve the transparency and efficiency of their businesses. Blockchain allows insurers to share data and documentation with each other and provide payment notifications. The data is stored in 'blocks' and 'chains' join these blocks together to form a cohesive, unbroken and immutable record of information. Crucially, blockchain technology does not impact on the fundamental principles of taking on risk, acting as an enabler for the efficient running of insurance administration. In a recent discussion paper Pinsent Masons explained that as the technology would enable all members to have their own perfect copy of the same data that is stored in the same data structure, there would be no need to reconcile data or integrate different systems. Read more...

New Guidance finalised on Professional Indemnity Insurance Requirements under PSD2

The European Banking Authority has finalised guidance for some financial technology companies on the type of professional indemnity insurance, or comparable guarantee, they will need to put in place to operate in the EU's payment services market next year. The EBA's finalised guidance is designed to reflect rules set out in the EU's revised Payment Services Directive (PSD2). The guidance will apply from 13 January 2018, the date on which PSD2 must take effect in national legislation across EU member states. The guidance contains a formula designed to help financial regulators to check whether the level of professional indemnity insurance or other comparable guarantee is sufficient to cover the potential liabilities that payment initiation service providers (PISPs) and account information service providers (AISPs) face under PSD2. Read more...

FCA to merge RDR review with assessment of FAMR

The FCA has delayed its review of the impact of the Retail Distribution Review (RDR) until 2019 to coincide with a review it plans to undertake on the impact of the Financial Advice Market Review (FAMR) reforms, it has confirmed. The regulator had been due to re-examine the impact of the RDR, which was introduced in 2012, this year, but confirmed its rethink in a new paper published on the baseline position and indicators it intends to reflect on when monitoring the development of the financial advice market. Expert in the regulation of financial advice Bruno Geiringer of Pinsent Masons said: "Time marches on and the Retail Distribution Review has been and gone and, to all intents and purposes, been consigned to history. For those that do remember the RDR, some may feel that it failed in many respects to achieve its objectives. Will we ever see the famed post-implementation review? The reality is it is best not to dwell on it too long or hold your breath. Brexit is just round the corner and no doubt there will be another reason in a few years' time to shake up the UK advice market and move away from MiFID because of the UK market's unique characteristics." Read more...

FCA publishes plans to improve UK asset management 'competitiveness'

The Financial Conduct Authority has concluded its review of the UK's Ł7 trillion asset management sector, publishing a package of potential measures to improve competitiveness and increase investor protection."The final report is not quite as final as it could be," said pensions expert Tom Barton of Pinsent Masons. "As appeared likely, the FCA has reserved judgement in a number of key areas and paved the way for consultation and investigation. The report also rightly notes that some of the interim findings are already being addressed by developments at European level, such as MiFID II." "The story is therefore yet to unfold in full – but it will certainly include an interesting chapter on consolidation of pension schemes. The FCA's recommendation to the DWP to 'remove barriers' to consolidation should help the drive towards economies of scale." Read more...

Court of Appeal QOCS decision provides claimant insurers comfort, says expert

The Court of Appeal has ruled that qualified one-way costs shifting (QOCS) should apply where an injured party has the right to pursue compensation against an organisation such as an insurance company or tour operator, rather than the wrongdoer. Costs expert Keith Levene of Pinsent Masons said the judgment would provide reassurance to claimants and their insurers that they would not be liable for costs in similar cases. "It is of benefit to claimants and their insurers that the QOCS regime is in place," Levene said. Read more...

City minister commits to discount rate review

The government will move ahead with plans to reform the 'discount rate', a minister has confirmed. A consultation on the need for changes to the way in which the discount rate applied to lump sum personal injury compensation payments is set was interrupted by the UK general election. A new rate of minus 0.75%, down from 2.5%, came into force on 20 March in England and Wales and 28 March in Scotland this year, effectively increasing compensation awards in order to reflect assumed loss of value. Read more...

PRA: Insurers may have to adjust policies to reflect 'silent' cyber risks

Insurers whose policies could give rise to claims for damage as a result of cyber attacks may have to adjust their policies or premiums to better reflect these risks, the Prudential Regulation Authority (PRA) has warned. Read more...

For regular comments, news and views from the insurance team at Pinsent Masons, see our insurance content on Out-law here.

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