The 2021 AIRROC Spring Meeting was kicked off by the rise of the InsurTechs presentation given by Brian T. Casey and Benjamin P. Sykes of Locke Lord LLP, Cole Winans of Flyreel and Brent Williams of Benekiva.
Many of the InsurTechs making headlines today are directly involved in one or more of the traditional segments of the insurance industry – selling, adjusting or underwriting insurance policies. While these activities are at the core of what constitutes the business of insurance, there is another important segment of the InsurTech ecosystem that provides key ancillary services to the industry.
These “Non-InsurTechs” include companies that provide customer and agent facing digital user interfaces (such as Sureify), claims system integration capabilities (such as Benekiva), or consumer-enabled underwriting (such as FlyReel) or telematics data (such as Cambridge Mobile Telematics). However, importantly, because these Non-InsurTechs do not themselves sell, adjust or underwrite a single insurance policy, they exist outside the primary ambit of insurance regulators and avoid many of the regulatory burdens associated with licensure as an insurance agent, third party administrator, managing general agent, adjuster or insurance carrier.
However, just because such Non-InsurTechs are not licensed by state insurance departments, it does not mean that they are free from all insurance related regulation. Most notably, cyber security regulations applicable to insurance carriers and agents require that obligations are imposed on all vendors, which often require significant investment by such Non-InsurTechs in order to comply with these laws and related contractual requirements. In addition, if the Non-InsurTechs are gathering, transmitting or retaining personally identifiable information and/or protected health information, the Non-InsurTechs must ensure that they comply with all applicable privacy laws. Finally, as regulators are increasingly focused on the impact of proxy discrimination, these Non-InsurTechs will need to ensure that any underwriting information, algorithms and scoring is explainable and non-discriminatory, both facially and in practice.
While these Non-InsurTechs can drive significant cost-saving and revenue growth for both carriers and agents, it is important in any contracting arrangement to ensure that the obligations noted above are, where appropriate, passed on to such downstream Non-InsurTechs and that the Non-InsurTechs have implemented appropriate protocols and guardrails to ensure compliance. Doing so will safeguard both the licensed entity as well as the Non-InsurTech in the event of examination, data breach or consumer lawsuit.