Insurance Europe Annual Report 2020-2021

Digital resilience

THE CHALLENGES

As the pandemic speeds up the move online, individuals and businesses need to be more digitally resilient than ever

WHAT INSURERS CAN DO

WHAT POLICYMAKERS SHOULD DO

THE CHALLENGES

WHAT INSURERS CAN DO

WHAT POLICYMAKERS SHOULD DO

THE CHALLENGES

Imagine the COVID-19 pandemic without access to innovative digital tools. The effects of the virus and the resulting lockdown measures on lives and livelihoods would have been incalculably worse had so much activity not moved online. The speed at which individuals and businesses have implemented digital solutions has also contributed to recent increases in the forecasts for global economic recovery.

The pandemic has only served to speed up trends that had already begun, such as remote working and businesses and services moving online to meet the growing expectations among consumers of round-the-clock access to online products and services. Such shifts, of course, bring not just benefits but also challenges. These challenges to digital resilience include: how to avoid or reduce malicious or accidental cyber risks; how to ensure the security and privacy of often highly personal data; and how to implement new rules without hampering innovation, so that consumers and businesses can trust and embrace digitalisation.

The European insurance industry welcomes the European Commission's ambitious plans to shape Europe's digital future and create what it calls “A Europe fit for the digital age”. Those plans are so ambitious that perhaps the greatest challenge is to bring the many initiatives together into a coherent, effective whole. Much work is underway and further initiatives are in the pipeline on:

artificial intelligence (AI)
cloud computing
cybersecurity
data
digital finance
other digital areas

EC digital strategy: three streams of action

Technology that works for people
A fair and competitive digital economy
An open, democratic and sustainable society

“Innovative tools are particularly helpful in detecting the insurance fraud that costs insurers and their honest customers an estimated €13bn a year.”

THE CHALLENGES

WHAT INSURERS CAN DO

WHAT POLICYMAKERS SHOULD DO

WHAT INSURERS CAN DO

Insurers have long invested in new technology and digital solutions to improve their operations and the products and services they offer consumers. Indeed, that is why Europe's insurers have been able to maintain business continuity and continue to support customers during the pandemic.

The use of new tools and technologies has many potential benefits for insurance consumers:

Improved communication channels with their insurance providers, including the possibility for round the clock assistance.
Easier access to information, products and digital services, thereby widening choice.
Products and services better tailored to the needs and demands of consumers.
Improvements in speed and efficiency in the delivery of insurance services, with the potential for lower transaction costs. In April 2021, one of Europe's largest insurers announced a new AI solution that it says will allow it to cut the time taken to settle property claims to under 24 hours. And this is just one of many such examples.
The potential to reach new or wider groups of consumers, such as young digital natives, which can lead to higher levels of financial resilience.

Motor insurers: driving innovation

Take the motor insurance sector as an example; consumers are benefiting from a range of innovative products and services, many if not all of them predicated on insurers' access to driver data. One is “pay as you drive” and “pay how you drive” policies that are tailored to driving frequency and style and can improve road safety and result in premiums that better reflect how and how much an individual drives. Others include speedier claims-handling and sophisticated claims-related services, such as the recovery of stolen vehicles and advanced breakdown assistance.

Italy's telematics success

Intelligent ways to tackle fraud

Innovative tools are particularly helpful in detecting the insurance fraud that costs insurers and their honest customers an estimated €13bn a year. Insurers across Europe are increasingly making use of big-data tools to detect cases of fraud by cross-matching data from different databases, such as those of tax authorities. There are many local examples of the use of new technology to tackle fraud: in Sweden, for instance, insurers use advanced key-readers to confirm that car keys submitted in support of a claim for a stolen vehicle do indeed belong to the vehicle alleged to have been taken.

And let us not forget that insurers provide insurance and risk-management expertise for the risks from new technologies or products or the malicious malware, data breaches or phishing to which businesses can be exposed. You can read more about this in our Cyber resilience article.

What Insurance Europe is doing

“Appropriate EU regulation should foster trust and confidence in consumers' digital use, support innovation and allow cross-border growth and competition.”

THE CHALLENGES

WHAT INSURERS CAN DO

WHAT POLICYMAKERS SHOULD DO

Innovation-friendly rules

The EU regulatory and supervisory framework for insurance should be conducive to innovation and allow consumers and both established and new companies to benefit from the opportunities that digitalisation can offer.

This is currently not the case. There are regulatory barriers to providing insurance online. For example, there are requirements for paper documentation in the Insurance Distribution Directive. And the EU's world-leading data privacy legislation, the General Data Protection Regulation (GDPR) creates legal uncertainty over — and limits the potential use of — blockchain and distributed ledger technologies, which have the potential to reduce costs, increase transparency and strengthen trust in insurance.

Rules that properly consider the specific characteristics of insurance

With the progressive digitalisation of the economy, new digital rules will affect business sectors in a way that may not have been foreseen by legislators. For example, the proposed e-Privacy Regulation currently being discussed by the European Parliament and Council needs to include a clear legal basis to allow insurers to continue to offer innovative insurance products such as telematics-based motor insurance.

After setting the global regulatory pace on data privacy with the GDPR, the Commission is now doing the same for AI, recently unveiling legislation aimed at regulating the use of AI across sectors. Attention will need to be paid to ensure that these new requirements fit well with the strict insurance regulatory framework that already exists (see next section) and that they do not hinder the use of AI in insurance and deprive consumers of its benefits.

In relation to civil liability and AI, Insurance Europe believes the existing EU liability regime, the Product Liability Directive — in conjunction with national tort law — works well for new and emerging technologies and that there should be no major changes to this regime.

Avoid overlaps and inconsistencies

The EU's ambitious digital agenda and the many regulatory initiatives that are planned create a very real danger of duplications or inconsistencies between horizontal and sectoral initiatives, as well as between new and existing requirements. This would increase red tape and legal uncertainty, and ultimately hamper innovation. A key priority for policymakers should therefore be to ensure a coherent regulatory framework, with financial services legislation, rules and guidelines that are sufficiently future-proof to be fit for the digital age. Rather than automatically introducing new regulation to achieve this, policymakers should review how existing rules might be adapted.

Same risks, same rules

As new service providers are tempted into financial services by new technological opportunities and consumer behaviours, it is important that they are as comprehensively regulated and supervised as existing financial services companies. It is crucial that the principle of “same activities, same risks, same rules” is respected to ensure that consumers enjoy the same level of protection regardless of their provider.

Respecting this principle must be a vital part of the proposal for an open finance framework that the Commission is expected to put forward by mid-2022.

Data framework

It is crucial to have an EU data strategy that allows the benefits of data usage to be maximised, while still protecting and respecting individuals' rights. Enhancing the legislation on access to, processing and sharing of data is important in order to promote innovation and competition. Promoting a data-driven financial sector is an important and valuable aim. The insurance industry is supportive of efforts to facilitate appropriate data-sharing, in which the treatment of different players is based on a true level playing field. Furthermore, it is paramount that customers have absolute confidence in the security of their data and full control over the data being shared.

A concrete example here is the need to safeguard the current interplay between the e-Privacy Directive and the GDPR in relation to the collection and processing of data from terminal equipment to ensure the needed flexibility to process personal data in situations where relying on consent is not possible.

And Insurance Europe welcomes the Commission's efforts to improve the effectiveness of the Regulation on electronic identification and trust services (eIDAS Regulation), extend its benefits to the private sector and promote trusted digital identities for all Europeans.

Quality over speed

Insurance Europe welcomes the Commission's prioritisation of digitalisation and its efforts to address some of its challenges through legislation. The Commission plans to deliver on most of its regulatory initiatives in this area by the end of its mandate, ie 2024. Care must be taken that the fast speed at which some of the initiatives are going ahead do not lead to badly thought-through or untested legislation that could inadvertently harm innovation and fail to take into account the very specific characteristics of highly specialised and unique sectors, such as insurance.

Policy Dos & Don'ts

Awareness-raising campaigns

Insurers across Europe are involved in a broad range of awareness-raising campaigns. For instance, in Germany, risk-awareness campaigns are implemented jointly by state authorities, consumer protection organisations, the insurance industry, architects and other stakeholders. Their collaboration is built around a common goal: to raise awareness of the effects of climate change and natural hazards, of the benefits of loss prevention, and of best practices as regards natural catastrophe-resilient buildings. The high level of risk awareness in Germany is one of the reasons for the relatively low protection gap; indeed, the insurance penetration rate for natural perils such as storm or hail is more than 90%.
Most European insurance associations have initiatives to raise risk awareness, such as dedicated workshops, events and educational seminars, as well as frequent in-depth articles, themed newsletters, presentations and other publications.
Many French insurers have launched prevention campaigns and also support the campaigns of “Assurance Prévention”, an association founded by the French insurance association (France Assureurs). Assurance Prévention has produced numerous leaflets, infographics, quizzes, etc. to raise awareness of natural risks. Through its initiatives, it aims to develop a “culture of risk prevention” among students and teachers.

The Greek insurance association (HAIC) launched a digital awareness campaign — “Better to know than to think you know” — to provide consumers with useful information about private insurance and to set the record straight on some misperceptions. The campaign consists of six videos to educate the public about how private insurance works. Most of the videos emphasise the need for resilience in the face of natcat risks and the role of insurers in protecting private property. The videos are hosted on the interactive iknow-insurance.gr platform, which allows visitors to do a short quiz to test their knowledge of private insurance and then obtain additional information.
Insurance Sweden is currently working with its members on a common methodology for calculating carbon dioxide emissions during building repairs. The aim is to raise awareness of the impact on CO2 emissions of rebuilding after fire or water damage, and thus of the importance, from that perspective as well, of preventing such damages.
Insurance Sweden published a statistical report in October 2021 on how different municipalities and regions have been affected by damage caused by flooding, storm and fire.
Spotlighting the central role of municipalities in climate-change adaptation, Insurance Sweden ranks Swedish municipalities according to their adaptation work. The methodology is based on the European Commission’s Adaption Support Tool (2013). The ranking is released every other year, the June 2021 version is available here.
UNESPA, the Spanish insurance association, launched a dedicated website in October 2021 — “Naturalmente Protegidos” (Naturally protected) to explain how natcat insurance works in Spain. It focuses on 10 different risks (rain, flood, wind, drought, frost, hail, snow, earthquake, volcanic eruption and lightning) and details for each how insurance covers property, life, harvests and livestock. The website illustrates the success of the Spanish public-private natcat insurance model. It was jointly developed by private insurers (UNESPA), the Consorcio de Compensación de Seguros (CCS) government scheme and Agroseguro, Spain’s agricultural insurance system, and was launched within the framework of Estamos Seguros, UNESPA’s financial education campaign (running since 2016).
In collaboration with CEPYME, the Spanish confederation of SMEs, UNESPA launched in October 2020 “Prevenir para crecer” (Prevent to grow), a website with information on insurance for SMEs. The website highlights potential risks to which SMEs are exposed, including natcat-related risks, and provides advice on how to prevent them.
Insurance Ireland, the Irish insurance association, and a number of Irish insurers have launched consumer blogs and information repositories on their websites to share useful information with consumers about responsible and ESG investing.

Education

The European insurance industry works to increase financial literacy in relation to risk awareness, insurance protection and long-term savings:

The Croatian Insurance Bureau (HUO) launched a first educational project in 2009, “Financial literacy in the Republic of Croatia”, which was followed by a range of educational activities, often implemented jointly with independent insurers. One of these activities, “Safer Tomorrow”, was initiated in 2021, and aims to raise citizens’ awareness of the benefits of insurance. Within the framework of the project, HUO launched several videos and infographics, some of which specifically target young people.
The HUO organises a yearly competition for the best scientific paper, the best graduate thesis and the best undergraduate thesis in the field of insurance. HUO also publishes the “Croatian magazine for INSURANCE”, a scientific journal for professionals to advance good practice in the sector. Finally, some insurers in Croatia created a colouring book for children to promote financial literacy at a young age in a fun and simple way.
In Italy, the ANIA Academy, together with CeTIF (Research Centre on Technologies, Innovation and Finance of the Università Cattolica del Sacro Cuore), launched the second edition (2022) of the 2nd level master’s in insurance management to train professionals and enable them to respond to the challenges of the “new normal”.
ANIA is also collaborating with LUISS Business School to develop a major course in insurance management as part of its Executive Master in Financial Management.
Insurance Europe produces information for consumers as part of its “InsureWisely” financial education initiative. This includes one-pagers on different insurance topics, including how to limit the effects of natural catastrophes.
The French insurance association (France Assureurs) developed a series of educational booklets within the framework of EDUCFI (the French national strategy for economic, budgetary, and financial education), an initiative launched by the French Central Bank. These booklets help users to better understand how insurance works and what insurance products do and do not cover.
The Spanish insurance association (UNESPA) set up a financial education programme for schools, “El Riesgo y Yo” (“The Risk and I”). It involves 40 insurance undertakings and 164 volunteers and aims to give 2 500 teenage school students basic financial knowledge and insights into risk management.