People still biggest risk in insurance and banking – Central Bank

The Central Bank's director general for financial conduct, Derville Rowland, has said that individuals working in insurance and banking remain the biggest threat to customers as the financial industry goes through technological advances at speed.

“The greatest risk to customers comes not from technological developments, but from the people in charge of the technology,” Ms Rowland said at the European Insurance Forum in Dublin on Wednesday. “If you put new technology in the hands of people and firms who have the best interests of customers at heart, it is far more likely to result in positive consumer outcomes.”

The Central Bank recommended in a recent culture report on banks that the Government set up a so-called individual accountability framework to make top bankers accountable for failings under their watch.

“For the avoidance of doubt, let me be very clear that we are recommending that these proposals would apply, beyond banks, to certain insurance undertakings and investment firms,” Ms Rowland told a group of insurance executives at the forum.

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Recent technological advances in the insurance sector have included US life insurance group John Hancock saying last month that those taking out "interactive" insurance in future with the firm must wear fitness tracking devices with policies. Meanwhile, British travel company Thomas Cook joined with fintech firm Revolut earlier this year to launch "pay-per-day" medical insurance coverage that kicks in when the customer's phone signals that the customer is in a foreign country.

A recent survey carried out by consulting firm Capgemini found that 96 per cent of insurers were looking to collaborate with so-called insurtech firms in some way.

Just like the ATM

“Consumers will likely welcome many of these developments. Just as we embraced the ATM back in 1980, many will see that the new technology brings benefits including speed and convenience, greater choice in products and services, cheaper deals and more personalised products,” said Ms Rowland.

However, the regulator said insurance firms must ensure that in designing new products that they have customers’ best interests at heart.

“Insurance products are not visible in the way that other physical consumer goods are,” she said. “Because consumers cannot see or touch the product they are purchasing, it is difficult for them to understand whether it meets their needs now and in the future. Any flaw may not surface for a number of years.”

This makes it all the more important that the professionals who do understand and sell the products, ensure that they meet consumers’ needs and expectations, according to Ms Rowland.