Insurance in the Digital Age: Legal and Regulatory Challenges

Over the next decade in this new and evolving technology-led environment, innovative and diverse ways for people and organisations to interact will influence every facet of insurance, from industry services through to actuarial forecasting, underwriting and reinsurance. The increasing sophistication and availability of powerful artificial intelligence (AI) and analytics tools to process vast datasets is challenging traditional conceptions pertaining to asymmetry of information and raising issues as to the integrity of data being analysed and the assumptions of the predictive models being deployed. Moreover, the development and expansion of AI in relation to driverless cars, robots, the use of autonomous machines to execute complex financial transactions and other innovations gives rise to diverse legal concerns ranging from the concept of “AI personhood” to bias and liability issues—with obvious insurance implications. As world economies become increasingly digital, and the physical and digital worlds continue to be inter-connected through the use of AI, robotics and immersive technologies such as the metaverse, the need for risk transfer will remain. Distributed ledger technology (DLT) and blockchain, powered by smart contracts, provides a mechanism for such a digital bridge whilst also being consistent with the current market structure within which risk is pooled and distributed. The ability to access “Big Data” in conjunction with technological advances in AI, predictive analytics and blockchain create the foundation and operational capacity for new insurance products and new ways to create and consummate insurance transactions with on-demand insurance and embedded insurance described and discussed in the article. The world has become increasingly digitally connected and will continue to become more so—particularly with advancements in, and growth of, “Internet of Things” technology going forward in areas such as driverless transport, automated product ordering and manufacturing. In this context—and for as long as computer systems are connected to the internet—the playground for cyber criminals gets bigger every day. The importance of cyber insurance and the challenges faced by insurers in this market cannot be overstated. The determination of liability in novel technological contexts will continue to challenge regulators, insurers and the wider community on a global basis with the rapid development of technology complicating traditional risk assessment practices and protocols.