The Insurance Authority has recently launched two new initiatives to promote the use of insurtech in Hong Kong. These are the 'Insurtech Sandbox' and 'Fast Track'. These are welcome steps and show that the Insurance Authority, which became the insurance regulator in Hong Kong just this June, is taking seriously its statutory function to promote the stable and sustainable development of the insurance industry.
Existing Hong Kong-authorised insurers (together with the technology firms working with them) can apply to run a trial in the Sandbox.
Within the parameters of the Sandbox, insurers can try out new insurtech and other new technology initiatives availing of some flexibility in the application of regulatory requirements. The insurer must comply with the Sandbox's principles:
- the insurtech trial will need well-defined boundaries and conditions (e.g. what insurtech will be involved; duration or anticipated launch date to the market; target users (e.g. staff or external customers))
- adequate customer protections
- adequate risk management controls
- adequate resources and demonstration that the insurtech or other technology initiative is ready for testing
- exit strategy in case the trial is unsuccessful and needs to be terminated
- other relevant considerations which will vary on a case-by-case basis.
By conducting a Sandbox trial the insurer can collect data to show the Insurance Authority that the insurtech or other technology initiative can broadly meet applicable regulatory and supervisory requirements.
Fast Track is a new streamlined and expedited application process for authorisations to carry on insurance business in or from Hong Kong entirely through digital distribution channels.
The regulator will require Fast Track applicants to have "an innovative and robust model using digital distribution to provide benefits to policy holders in product development, delivery, customer service and cost efficiency". Applicants must plan to own and operate their proprietary digital distribution channels. Traditional bancassurance, agency or broker channels are not permitted.
To ensure policyholder interests are protected under Fast Track while also allowing some flexibility to existing supervisory requirements:
- solvency, capital (and local asset requirements which apply to general business) must be met.
- at least one shareholder controller of applicant long term insurers must be an insurer, subsidiary or affiliate of an insurer authorised to carry on long term business in Hong Kong (or a jurisdiction with which the Insurance Authority has an information exchange arrangement in place)
- requirements under the Insurance Authority's guidelines will apply unless exempted or modified by the Insurance Authority
- policyholder protection measures will apply to the extent applicable to direct digital distribution
- the Insurance Authority may impose restrictions or conditions on the types of products that can be sold online.
Both initiatives are on a pilot basis for the moment. They are subject to refinement as the Insurance Authority will monitor their implementation and industry developments.
Further information on the Insurance Authority's insurtech initiatives is available on its new insurtech webpage www.ia.org.hk/en/insurtech.
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