the importance of regulating for the protection of consumers conf dig… · •enhanced risk...
Post on 30-May-2020
2 Views
Preview:
TRANSCRIPT
The importance of regulating in the
FinTech’s world for the protection
of consumers
Călin Rangu
Business Conduct Director, Authority of Financial Supervision
Vice-president InsurTech Task Force,
EIOPA-European Insurance and Occupational Pensions Authority
1. Who are the customers, and what
to protect
2. How to regulate and supervise the
technological innovation in financial
sector
Summary
3
Who likes tech changes?
• Customers, they have needs for better services
• Digital customers, more and more eager technologyconsumers
• The companies themselves, partially, for sustainablecompetitive advantage need
• IT staff or tech companies, where the focus is ontechnology, and less on technology as a real businessfactor
4
But…what for?
• Personal well-being – the goal of finance, to assure prosperity anddevelopment
• Customer satisfaction – for a better and qualitative experience
• Financial inclusion – more people to have access and lower prices
• Cost reduction – automate, standardization
• Profit increase – business enabler
• Market share – distribution channels, customer satisfaction
• For compliance– Solvency II, IDD, MiFid, PRIPs etc.
Opportunities
and challenges
Opportunities for
industry
Challenges for
industry
Financial inclusion or exclusion?
Price optimisation: fair treatment of consumers?
Data accuracy and spurious correlations
Privacy issues and data ownership
Non-digital population left behind
Less comparability of (individualised) products and prices
Supervision of algorithms
Personalised products and services
based on own needs and
characteristics
Better customer experience
Empowerment
Addresses information
asymmetry/transparency
Enhanced competition: reduced
prices
Risk mitigation and prevention
New competitors: defeat or ally?
IT Flaws
Cyber risk
Access to data: data oligopolies?
Employment
Legacy issues
Insurance business model to be re-
thought?
Fragmentation of the value chain
Cost efficiency
Enhanced risk assessments
“Regtech”
Targeted and individualised advertising
Improve their customer’s experience
Direct access to customers
(disintermediation)
Fight against fraud
Challenges for consumers
Opportunities for
consumers
Source: EIOPA
5
6
Challenges for
financial companies
Today‘s challenges for financial leaders:
• Regulations,• Market, and• Technology
We will speak about information technologyinnovations. But…..
“Prediction is very difficult, especially about thefuture.”
7
What does tech change?
Ex: Big Data impacts all stages
of the insurance value chain
Product design and development
Usage-based insurance products (e.g. car telematics or health wearables)Tailor-made product and servicesNew products: cyber insurance products
Pricing and underwriting
• Enhanced risk assessments
• New claims drivers and predictive models
• New non-risk based pricing techniques
Sales and distribution
• Automated advice
• Disintermediation of sales processes
• Increased frequency and customer interaction
• Gamification
Post-sale services and assistance
• Smartphone applications
• 24/7 service, accessible form any location
• Chat boxes and artificial agents
• Geolocation and personalised warnings in case of flood, storm, hail, etc.
Claims management
• Enhanced fraud analytics
• Accurate information about the accident and its dynamics (e.g. photos, geolocation etc.)
• Picture recognition (e.g. car damage or facial recognition) and automated loss adjusting
Source: EIOPA
8
9
New business models +
Greater risk to disruption +
Cybersecurity +
Increased complexity +
New threats +
Many unknowns
What does tech inspire?
Age Childhood Teenage Adult Retirement
Even
tsin
life
Games
WishesWishes
Studies
Fun
Family
House
Jobs
Holidays
Retirement
Nephews
Unexpected events in life include losing the job, accidents, illness
- - - - - - - - Common elements – importance of financial planning - - - - - - - -
- Incomes - - Expenses - - Risk - - Responsabilities - - Wishes -
Authorities should protect consumers, to fulfil their well-being, classical or digital!
Consumers’ Protection
For All Life Cycle
• the right to be informed –transparency, to allow access to information of interest in
order to adopt rational decisions etc.
• the right to know their rights and obligations - to provide information dedicated to
consumers and to conduct informational and educational campaigns, clear and
formulated in a language close to them (simple and concise).
• the right to negotiate and pay a fair price, to compare prices between prices -
ensuring that no monopoly or abuse, fraud, lack of transparency, misleading
advertising, malpractice, etc. cases appear or unauthorized activities occure.
• the right to receive assistance - providing assistance to consumers through an
accessible and free of cost system.
• the right to complaint and access to a dispute resolution system - restoring legality
and normality situations.
What rights do we protect?
Yin & Yang of consumer
protection
➢ Preventive actions vs Reactive actions;
➢ Prudential Regulation vs Conduct Regulation
➢ Classical protection vs Business Conduct Supervision
➢ Bottom-to-Top op vs Top-to-bottom approach
➢ A value chain model applied, by an integrated, functional and efficient
organizational framework
➢ Smart regulation and supervision starting from innovative public policies
and strategies in an innovative new world
ConsumerDetriment
lack of
processes, poor
processes,
organizational
problems and
non-governanceproduct and
activity faulty practices, bad
POG
conditions for employment
and job security, staff profesional
developmentcustomer treatment,
faulty processing of
data relating to them
internal & external frauds,
Conflicts of interest
interruption of operation and
malfunctioning of the systems, cyber-threats
Classical sources of consumer
detriment
People
Systems
Processes
Externalevents
Legal risks
ConsumerDetriment
Cyber-
risksData
manipulation, ethics and personal
protection issues
Perversiveinformation, fake-news
Technicalissues in
operations
On-linefrauds or legal
avoidance
Financial exclusion
Sources of consumer detriment
generated by financial technologies
Analyzing post-loss & causal factors, all faulty eventsthat had a good chance of being prevented ordetected if …
…Aggregate, analyze and escalate Key RiskIndicators (KRIs) providing ‘closer to real timeinformation’ using …
… Innovative technologies for prevention, structured& unstructured data analytics, pattern recognition, AI,etc.
Supervision and Management
of risks using technology
1. General principles of regulation and
supervision of consumer protection
2. How to regulate and supervise the
technological innovation in financial
sector
Summary
How?
Creating FinTech HUBs at the level ofnational authorities
A controlled development of the new innovative technological products or services
- assure market stability
- protect the consumer/user
for
to
18
Disruptive Forces managed by
FinTech Task Teams
at financial authorities level
➢ Cyber Risks: to better understandthe risks, and the cyber impact
• new opportunities and challengesthat cyber risks imply for the sector
• a sectorial vulnerabilities analysis
• potential build-up of risks andconsumer protection
• mitigations and extended activedialogue
➢ Big Data: review of the use, seeking to gatherempirical evidence on the use of Big Data inareas such as pricing, underwriting, claimsmanagement, sales and/or marketing
• the benefits and potential risks to fairtreatment of consumers
• assessing the boundaries of potential ethicaland privacy issues arising from enhancedconsumer profiling techniques and moregranular risk assessments
• the impact of Big Data on the availability andaffordability of insurance for consumers
EIOPA and more national authorities set-up FinTech teams to manage topics as:
19
FinTech Task Forces (2)
➢ Convergence on supervision of algorithms
- to assess the design and use of algorithms to
determine how the functioning of
increasingly complex analytical IT tools and
processes (e.g. artificial intelligence or
machine learning) can be best supervised
and/or communicated to consumers.
➢ Distributed ledger technology (DLT) /
Block-chain:
• explore the benefits and risks arising from
the use of block-chain and smart
contracts for financial companies and
consumers,
• assessing possible regulatory barriers
preventing the deployment of this
innovation.
20
FinTech Task Forces (3)
➢ New value chain and business models:
• supervisory challenges arising from the new
business models and the possible
fragmentation of the value chain.
• the increasing collaboration between
financial companies and non-regulated firms
(data vendors or cloud computing service
providers).
➢ Innovation Hub:
• to develop a European Innovation
Hub.
• a structured framework where NCAs
and FinTech firms would regularly
exchange experiences and provide
guidance
21
FinTech Task Forces (4)
➢ RegTech: the impact in the context of
regulatory monitoring, reporting and
compliance
• assessing how Big Data and other
innovative data-analytical tools could be
used for supervisory purposes in order to
capitalize on the new data-reporting
requirements
• Collaboration with start-ups and other
entities for their data analysis capabilities
➢ Mapping supervisory approaches to
FinTech - establishing efficient and effective
supervisory practices.
• how the principle of proportionality is being
applied in practice specifically in the area of
financial innovation (e.g. regarding FinTech
start-ups such as P2P insurers)
• identifying possible regulatory barriers to
financial innovation
ASF Romania InsurTech HUB
OBJECTIVES• Presenting the best practices in the field;
• Stimulating innovative technologies favorable to consumers; developingregulation and supervisory resources and the development of the insurancemarket;
• Monitoring of innovative technologies development from the perspective of:– the current regulations and those required to be applied in the future;
– the conduct of companies that promote such solutions and
– the conduct of entities that use innovation technologies and solutions.
• Supporting innovative technologies development in a controlled andconsumer-friendly manner with the protection of their rights and interestsfrom the perspective of digital identity, dematerialized assets and personaldata.
22
❑Romanian Financial Supervision Authority (ASF) set-up an InsurTech HUB
InsurTech HUB Romania
ACTIVITIES
• Proposals to support innovative technologies in insurance, including the
required regulation;
• Providing ASF’s support to insurance undertakings, technology companies
and hubs to understand and enforce the regulation;
• Supporting the application of innovative technologies;
• Facilitating collaboration with the insurance / reinsurance market entities to
exchange information on technological issues that support better regulation;
• Publishing information, recommendations.
23
Encouraging responsible innovation
at each stage of development
24
• Promote the generation of ideasIdea stage
• Facilitate the process of compliance
Compliance stage
• Test how the idea works in practice
Implementation stage
Expansion stage • Facilitate expansion to all market
Idea stage
• Networks or forums
– Exchange ideas for applications and initiate research
– Share emerging trends
– Facilitate synergies (e.g. incumbents and start-ups)
– Identify regulatory barriers
– Brainstorming to solve specific market problems
• Support units
– Encourage innovation in a specific area
25
Compliance stage
• Innovation hubs
– Support to identify relevant regulation
– Support in how to comply with regulatory requirements
– Hub and spoke model
– Dedicated advisers
26
Implementation stage
• Regulatory sandboxes – THE MAIN REGULATION TOOL– Test new ideas in a controlled environment
– Provide feedback to adapt an idea or a regulation
– Entry requirements include that an idea is innovative and that theconsumers will benefit from it
• Types of flexibilities offered– Temporary license or exemption
– Non-applicability of certain rules
– Tailored regulations
• Consumer protection maintained– Suitability rules
– Access to redress
– Qualification requirements
27
Challenges
28
• How does promoting innovation fit?
Mandate of oversight body
• Knowledge, identifying barriers and how regulations should apply
Keeping up with innovation
• Financial institutions-focused regulation, local ownership, paper requirements
Structural issues
• How to promote a culture of innovation outside of hubs?
Institutional culture
• Interpretation of regulation, variety of InsurTech
Consistency
• Demand for regulatory support may exceed supply
Capacity
Key to success: Engagement
29
Capacity
• Resources and networks
• International approach
Consistency
• Consistency in the application of regulation
• International cooperation to limit regulatory arbitrage
Culture
• Organizational support and buy-in
• Adaptability to change
THANK YOU! Q&A
Stylish templates can be a valuable aid to creative
professionals
Stylish designFACEBOOK
https://www.facebook.com/asf.romaniawww.asfromania.ro
A.S.F.
office@asfromania.ro
InsurTech HUB:
www.insurtech-hub.asfromania.ro
top related