An OECD report says that innovation in insurance could be blocked because insurtech start-ups face crippling capital rules under Solvency II
Capital requirements could stop insurtech companies from breaking into and disrupting the global insurance market, according to a report by the Organisation for Economic Co-operation and Development (OECD).
The OECD warned that startups will face pressure from inconvenient and onerous capital requirements under Solvency II as well as other regulations such as GDPR, which goes live next month.
The agency says that while these regulations are important, they could block new business breaking into the market.
In the report, the OECD said: “Insurtechs will have to meet insurance regulations as well as wider data protection and cybersecurity requirements as they try to scale their business.
“Ensuring that not only is the customer experience positive when it is scaled up, but that consumer protection and safety standards are met will remain a challenge for startups and regulators alike.”
In the UK, certain regulation authorities have already taken measures to promote innovation and disruption. The FCA launched its “Project Innovate” program in October 2014. Since then, it has helped more than 300 firms, the OECD said on Monday.
The FCA has also launched the “regulatory sandbox” which allows all businesses to experiment with innovative products and business models without being subject to the normal regulation.
Investment in U.K. insurance technology increased to £218 million in the first half of 2017, consultancy firm Accenture said in September.