December 10, 2017

Is regulation really an obstacle
for insurtechs?

A very important aspect for an insurtech are the regulatory issues. And, about this, it was great
to know the work of the CNSeg and it was also very important to hear SUSEP's positioning.

Fabricio Vargas Matos

Fabricio Vargas Matos

Co-founder & CTO

November was definitely an intense month. In addition to the normal activities related to app, website, communication and other developments, we had an intense planning agenda and meetings with investment funds. And, in the middle of all this, we were also present at two important events in São Paulo: the 2017 Insurance Innovation and Blockchain Summit, in which we could not only share what we are doing, but also update our vision of the most important advances in our market. For all that we saw, we can say that 2017 marked the beginning of the insurtech scene in Brazil.

A very important aspect for an insurtech are the regulatory issues. And, about this, it was great to know the work of the Market Intelligence Commission of the National Confederation of General Insurance Companies, Private Pension and Life, Supplementary Health and Capitalization - CNSeg, which has as one of its objectives to analyze the difficulties of insurers and insurtechs to propose to CNSeg and the Superintendência de Seguros Privados - SUSEP (insurance regulator in Brazil) a list of suggestions aimed at facilitating the improvement of insurance products. For Patricia Franceschini, leader of the insurtechs project at CNSeg, consumers are changing, raising their expectations, seeking more personalization, ease and transparency.

Of the almost 30 insurtechs interviewed, with the exception of Mutual.Life, all have a traditional insurer behind them and are working on several important incremental innovations, with 70% of them focusing on business channels and user experience. Their main complications are linked to process bureaucracy and the need for an integration with legacy systems. On the other hand, virtually nothing has been done to improve the insurance products themselves. And that is exactly where we are focused: in combining mutualism to automated risk management to create a new kind of protection.

It was also very important to hear SUSEP's positioning, which until then was a big unknown for us. The regulator made clear that the insurance policies defined by the National Council of Private Insurance (CNSP), among other things, aim to foster innovation, increasing competition and insurance coverage in Brazil, reducing compliance costs, without, however, losing the prudential aspects that the sector demands.

We are very excited to know that it is part of the institution's short-term agenda to study "peer-to-peer" insurance, and that the goal is to act with regulation only where it is really needed, if necessary. Another important agenda of the regulator is the study of a possible "regulatory sandbox", following the example of Singapore, to allow insurtechs to develop under the supervision of the agency, with room to experiment and validate their hypotheses with legal certainty.

Among the agency's concerns is the fact that there was an increase in concentration from 2016 to 2017 due to mergers and acquisitions in the sector, and 70% of the insurance policies are concentrated in the 10 largest insurers, which is a problem, as it increases the systemic risk. For us, this is all good news as it gives us a very promising outlook and further enhances our confidence that we are on the right track.

In addition, we participated in the 2017 Blockchain Summit, sharing the stage with important institutions such as Banco Itaú, Bradesco, Central Bank of Brazil, B3 (BM & F Bovespa + CETIP), SulAmérica and others; which without a doubt, was an honor for a small startup like ours. It was very interesting to have an up-to-date view of how development is at the other end of the blockchain spectrum, which are the solutions based on blockaded (or consortiumed) blockchains.

In short, our impression is that, on the one hand, the "proof of concept" phase begins to give way to the first real applications for the financial market in 2018. Insurers will still take more time, except for the basic applications of document registration. In general, applications considered to be viable in the short term are still very incipient, and there is a lot of work ahead until we have blockchain platforms robust enough to meet scalability requirements and obstacles linked to data replication between nodes, especially on the scale of institutions such as these. But the industry is moving fast, and news are expected for next year. We, however, are acting in a different context, the one of open blockchains (permissionless) like the network Ethereum and, for us, the challenges are a little different.

Anyway, 2017 was an incredible year. We started in the dark, not knowing exactly how the industry would respond, but we moved forward with confidence in our vision of value creation, and we arrived at the end of the year with the certainty that what we are building makes a lot of sense for Brazil and for the world. That is why, in 2018, we will focus on the development of our platform and the operational issues, so that we can then, with all prudence and responsibility, leave our closed pilots and start an open commercialization of our services and thus move towards in our objective of reinventing insurance through the union of blockchain technology and artificial intelligence.

Last but not least, this is our last article for 2017. We believe that 2018 will be an incredible year, a year of growth and maturity. We leave here our thanks to you who have followed our trajectory here and will continue with us next year. We wish you all a merry Christmas and a new year full of prosperity, health, peace and joy.


Fabricio Vargas Matos

Fabricio Vargas Matos

Co-founder & CTO

With master's degree in computer science (BSc, MSc) and a specialized in Blockchain (Bitcoin and Ethereum), 15 years coordinating software projects for the corporate market and mobile apps, he served as CTO in 3 startups.


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