A recent KPMG study concluded that a majority of insurers are planning to increase mergers and acquisitions in the next three years. The additional M&A activity is in response to increasing competition and the emergence of new technologies. However, as previously mentioned on this blog, insurers have yet to deploy substantial capital to acquire innovative technologies.
In Quebec, a substantial legislative change is expected in the next few months. The Quebec legislator, mindful of offering a regulatory environment that is flexible and apt to respect the evolution of technologies and consumers' needs, has adopted Bill 141, An Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions, on June 13. This legislation, eagerly awaited by industry participants, is meant to modernize the regulation of the financial sector, and more specifically, to help financial institutions adapt to an evolving market and changing consumer needs, all while improving consumer protection.
The adoption and coming into force of Bill 141 constitute an important step forward in the evolution of the InsurTech sector in Quebec. Bill 141 establishes the regulatory foundation upon which this industry will stand, and will shape its development in the years to come. Pursuant to this new regulatory framework, from June 13, 2019 onwards, insurers will be authorized to distribute certain insurance products without the involvement of a representative. This widens the door to the digital distribution of insurance. To that end, however, an insurer will have to meet certain criteria, discussed here.
The arrival of InsurTech in Quebec will significantly influence insurers' strategic orientations and should lead to a rise in M&A activity, as forecasted in the KPMG study. Indeed, this new regulatory flexibility provides insurers with the opportunity to modernize their insurance product offering. Insurers will be able to reinvent their products and distribution methods in order to enhance customer experience and tailor their business models to their customers' digital consumption habits. Industry participants hoping to capitalize on this legislative opening may draw on the experience of their counterparts in the United Kingdom, where the InsurTech industry is burgeoning, as evidenced by the significant investments of some major insurance companies looking to modernize their services (see our firm's publication from last year).
The author would like to thank Simon Du Perron, Amelie Guillemette, and Pier-Olivier Brodeur, summer students, for their assistance in preparing this legal update.
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