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About this book

This Volume of the AIDA Europe Research Series on Insurance Law and Regulation explores the key trends in InsurTech and the potential legal and regulatory issues that accompany them. There is a proliferation of ideas and concepts within InsurTech that will fundamentally change the market in the next few years. These innovations have the potential to change the way the insurance industry works and alter the relationships between customers and insurers, resulting in insurance products that are more closely aligned to individual preferences and priced more appropriately to the risk. Increasing use of technology in the insurance sector is having both a disruptive and transformative impact on areas including product development, distribution, modelling, underwriting and claims and administration practice. The result is a new industry, known as InsurTech. But while the insurance market looks to technology for greater efficiency, regulators are beginning to raise concerns about managing potential risks.

The first part of the book examines technological innovations relevant for insurance, such as FinTech, InsurTech, Sharing Economy, and the Internet of Things. The second part then gathers contributions on insurance contract law in a digitalized world, while the third part focuses on cyber insurance and robots. Last but not least, the fourth part of the book discusses legal and ethical questions regarding autonomous vehicles and transportation, including the shipping industry, as well as their impact on the insurance sector and civil liability. Written by legal scholars and practitioners, the book offers international, comparative and European perspectives.

The Chapters "FinTech, InsurTech and the Regulators" by Viktoria Chatzara, "Smart Contracts in Insurance. A Law and Futurology Perspective" by Angelo Borselli and "Room for Compulsory Product Liability Insurance in the European Union for Smart Robots?” by Aysegul Bugra are available open access under a CC BY 4.0 license at

Table of Contents


Technological Innovations and Insurance


Open Access

FinTech, InsurTech, and the Regulators

Considering the rapid evolution and penetration of technology in the financial sector in general, and in the insurance sector more specifically, FinTech and InsurTech respectively are destined to affect the scope and the implementation of applicable regulation. A number of issues arise: which are the value chain participants that will be ultimately subject to regulation? Who is the competent regulator from a sectoral point of view? How will the geographic scope of each national regulator’s powers be delineated, considering the global character of FinTech services? What should be the appropriate regulatory tools and methods to be applied? These issues are outlined in Sect. 1. A number of international organizations and fora are approaching and examining the FinTech/ InsurTech phenomenon, to assess its possible benefits and implications for the regulated markets. The activities undertaken by the Financial Stability Board (FSB), the Organization for Economic Co-operation and Development (OECD), and the International Association of Insurance Supervisors (IAIS) are briefly presented in Sect. 2. From a European perspective, EU authorities and institutions, including the three European Supervisory Authorities (EIOPA, EBA, and ESMA) also undertake initiatives, targeted at better comprehending the FinTech/ InsurTech phenomenon, as described in Sect. 3. Finally, there are a number of national regulators who are proactive on the national level and undertake measures aiming to foster technological innovation, in the provision of financial and insurance services, as mentioned in Sect. 4.
The regulatory activity is evolving very fast. It is still in a rather preliminary phase, but a large amount of new rules is expected to be produced within the next 2 or 3 years.
Viktoria Chatzara

Insurance in Today’s Sharing Economy: New Challenges Ahead or a Return to the Origins of Insurance?

In the early twenty-first century, technology-based peer-to-peer (P2P) business models have been popping up, multiplying and succeeding. These business models set themselves apart from traditional business-to-consumer (B2C) models. This paper aims at identifying and outlining the new types of technology-based business models in use in the insurance sector. We began our quest in search of the new challenges to the law of insurance brought about by such business models and found ourselves face to face with some new takes on the oldest forms of insurance known to humanity.
The new business models we have analysed can be broken down into three different classes: the broker model, the carrier model and the self-governing model. The broker model and the carrier model rely on traditional insurance players but allow customers to take on part of the risks insured by the group they happen to fall into or choose to adhere to and take back a portion of their profits, or at least make customers feel like they are taking on those risks and taking back such profits. The leading characters in such models appear to play, to a large extent, the same roles traditionally ascribed to insurers and insurance intermediaries. Whilst they may incorporate P2P elements, they are not, in essence, true P2P models. We deliver a brief outline of some of these existing models and provide a more detailed account of an example thereof: the entity best known as Friendsurance.
We then move on to examine the self-governing model, where we believed the most innovative and challenging arrangements were to be found. We analyse the entity best known as Teambrella. After identifying the contracting parties in the self-governing model and their roles, our attention falls on the new challenges this model brings forward: do contracts entered into through these platforms qualify as insurance contracts? Should insurance regulation apply to them? These questions, we find, have been asked and answered many times over in the past. Hence our research ended up providing an excellent opportunity for a look back into the origins of insurance.
We do not dispute the disrupting potential of InsurTech’s new P2P business models. From an industry point of view, they may well provide a very significant contribution to the revolution of insurance as we know it. However, from an insurance law perspective, our main conclusion is that for the most part the new business models are simply recycling and optimising the potential of some old recipes by applying them in a new, digital setting. Whilst the small scale of traditional self-help mechanisms proved too parochial to cater for the more sophisticated insurance needs, the digital revolution gave rise to a global self-help community, thereby providing the earlier self-help mechanisms with a new stage where they can compete with stock-based insurers on an equal footing.
Margarida Lima Rego, Joana Campos Carvalho

The Internet of Things and Insurance

The Internet of Things (“IoT”) is one of the major Internet-driven technological evolutions of our times. It is a network of devices, sensors, appliances, people connected to the Internet and to each other. IoT solutions are already being extensively used in numerous consumer, commercial, industrial and infrastructure applications, opening up new product and service opportunities across economy sectors, while at the same time creating new regulatory and business challenges. In this context, IoT has entered into the insurance industry as a significant disruption. This chapter aims to provide an overview of the ways in which IoT applications are affecting the insurance value chain and the insurer–customer relationship, as well as some thoughts on the possible interplay between IoT solutions and the applicable insurance law provisions (Sect. 2). Particular reference is made to IoT implications on the notion of the insurance risk, which is crucial and fundamental to the industry (Sect. 3), as well as to its effects on the civil liability model, where the allocation of liability and the ensuing obligations of the insurer shall have to be considered (Sect. 4).
Alkistis Christofilou, Viktoria Chatzara

The Challenges for Regulation and Control in an Environment of Rapid Technological Innovations

Currently, amplified use of the ITC-technologies and digitalization in almost all industries has changed the value and significance of the information. The use of these new technologies offer tremendous opportunities for innovation and development, but at the same time ask for regulation and control policies to ensure appropriate storage and use of information and avoid illicit utilization of data. Moreover, use of innovative technologies such as blockchain-based technology, artificial intelligence, cloud technology, and others has complicated and disrupted the landscape of the financial services providers and their ancillary service providers such as auditors, underwriters, advisors, actuaries, lawyers, and regulators. The insurance services industry as well is substantially influenced by these current developments especially through the intensive adoption of InsurTech and RegTech solutions. With this paper, we aim through a review of the literature, to highlight the challenges in regulation and control in an environment of rapid technological innovation, specifically focusing on InsurTech and RegTech, offering logical solutions to insurance companies. We also provide an analysis of the essence of the main technologies used or potentially used by the insurance services industry as big data, blockchain-based technology, artificial intelligence, and cloud technology, identifying the benefits and risks of these innovative technologies. The analysis results in the proposed strategy to develop and calibrate controls and regulations. To make suggestions for the use of the technological innovative potential in the insurance services industry, we integrate the basic utility model of behavior, as well as the underlying regulatory and control principles as a benchmark. The basic dilemma thereby refers to the control versus innovation dilemma, as all of the strategies for control of innovation due to technology in insurance markets are imperfect. Therefore, the efficiently managed controls are required to be flexible enough to allow for quick recalibration, whenever this is necessary, possibly with Artificial Intelligence or other RegTech solutions.
Simon Grima, Jonathan Spiteri, Inna Romanova

Insurance Contracts in a Digitalized World


Open Access

Smart Contracts in Insurance: A Law and Futurology Perspective

Smart contracts are innovative contracts that differ from traditional ones in that they are self-executing, as they entail the possibility of representing contract terms in programming code that gets automatically executed on a blockchain or other distributed ledgers. Following the latest developments in blockchain technology, smart contracts have been the focus of growing attention and are currently among the major innovations that are taking place in financial services. This paper investigates the scope for their application in insurance both in the near and longer term, exploring the legal challenges that they pose. The analysis shows that in the near term smart contracts will be mainly exploited to automate underwriting, claims handling and payouts. It considers how the automation of these processes will operate at law and emphasises the impact that smart contracts can have especially on the reduction of transaction costs and on the very essence of the insurance contract—the insurer’s promise to pay. Building on current technological developments, the paper then turns to role that smart contracts can play in insurance in the longer term, advancing the prospect of the automation of the entire insurance contract. In particular, it argues that the interaction between smart contracts and artificial intelligence and machine learning can challenge traditional frameworks of thought such as incomplete contracting and, in the farther-distant future, will culminate in contracts that will both self-interpret and self-enforce their terms—what can be called the true smart contracts. The analysis identifies and addresses the main legal issues that can arise in this context, exploring how to strike a balance between the goal of fostering innovation and the need to ensure policyholder and investor protection.
Angelo Borselli

Digitalisation of Insurance Contract Law: Preliminary Thoughts with Special Regard to Insurer’s Duty to Advise

This contribution discusses the way in which recent technological developments affect insurance contract law, in particular the insurer-policyholder relationship. The first part discusses instances of market innovation in the insurance sector and legislative reforms of insurance contract law that occurred in recent decades. The second part uses a specific example of the insurer’s duty to advise the policyholder as an illustration of how insurance law regulation embraced digital transactions.
Piotr Tereszkiewicz

New Technologies and Issues with Insurance Contracts in Japan

For the realization of a data-driven society with a cyber-physical system (Society 5.0), the Japanese government is working on the social implementation of autonomous vehicles and robots with integrated artificial intelligence (AI). These new technologies have complicated mechanisms that operate with autonomous judgment, as in the typical example of autonomous vehicles. Furthermore, it is extremely difficult to prove the existence of liability for damages, which is the basis of liability insurance; in this respect, insurance contracts can be affected. In addition, with the development of information and communication technology (ICT), insurers can measure the dynamic risk of insured persons or objects of insurance in a state close to real time. Therefore, there is the possibility of “reverse selection,” which weakens the basis of the insurance system. Furthermore, the development of ICT makes it possible to replace a part of the body with elaborate prostheses, leading to the fusion of Things and Humans. Whether these prostheses should be protected by property insurance or life insurance is a new problem. Finally, when a data-driven society is established with a cyber-physical system, the threat of cyberattacks increases. Insurance covering the damage caused by cyberattacks should be divided into cyber risk insurance covered by normal insurance, war insurance, and terror insurance.
Tadao Koezuka

Cyber Insurance, Robots


Open Access

Room for Compulsory Product Liability Insurance in the European Union for Smart Robots? Reflections on the Compelling Challenges

The twenty-first century has seen the exponential rise of machines capable of assisting people in all sorts of areas and which are placed in use in, inter alia, agricultural, medical, industrial and domestic contexts. These machines gradually becoming ‘smart’ and beginning to operate with self-learning tools has given rise to concerns as to liability in respect of losses arising from their use. The need to safeguard the rights of the parties harmed by their use (victims) without disturbing the policy of fostering innovation in the European Union has recently paved the way for the initiative of the European Parliament Committee on Legal Affairs towards the proposal of a set of rules on civil liability for robotics. The chapter provides an analysis of various potential risks that may emerge from applying the current product liability rules to new technologies, as well as focus on the challenges posed by the adoption of a compulsory product liability insurance scheme, as proposed. As the requirement of a duty to insure may bring along intricate problems of moral hazard, the chapter considers the efficiency of tools such as the monitoring of the insured’s behaviour and the introduction of deductibles into policies in alleviating this problem. It also assesses to what extent the protection of victims may be disturbed because of certain practices of the insurance framework such as the use of claims-made policies in product liability insurance. Overall, the chapter seeks to highlight the advantages and drawbacks of the proposed compulsory product liability insurance scheme.
Aysegul Bugra

The Idea of Robotic Insurance Mediation in the Light of the European Union Law

Rapidly developing insurance mediation market keeps intensifying the usage of modern technologies. These in turn enable the enjoyment of a variety of benefits such as easier contact with the client or profits maximization by increasing the efficiency of insurance mediator’s work. With this, modern solution called ‘robotic insurance mediation’ seems to be of particular interest. Its basic assumption is to minimize factual work of human beings within the process of client service.
This paper aims to discuss the existing possibilities of changing the activity of insurance intermediaries acting in the European market into more robotic taking into account the regulations of the IDD directive. Currently, some tentative attempts to introduce robotic mediation can be observed. Usually, they are focused on the so-called comparison websites. These in turn are based on relatively simple algorithms that compare the amount of insurance premiums. However, the said solution cannot be called robotic mediation sensu stricto. The comparison websites do not perform the activities that can be considered natural for ‘robotic insurance mediator’. Additionally, it is crucial to meet all the requirements resulting from the compulsory advisory or analysis of the insured’s needs as it is of particular importance in terms of preventing misselling practices or insurance brokerage activity.
With the above concerns, the analysis in particular focuses on whether the idea of robo-advisors complies with the requirements set out in the IDD directive and what are the potential obstacles in launching robo-advisors. As the nature of this paper is intended to be purely prospective, the authors attempt to present proposals for potential legislative improvements to facilitate the implementation of robotic insurance mediation.
Marta Ostrowska, Maciej Balcerowski

Cyber Risks: Three Basic Structural Issues to Resolve

The incidence of cyber liability and cyber losses, collectively cyber risks, have increased greatly over the last several years. To add to the problem, cyber risks also expose insureds to statutory liability.
The increasing number of incidents has given rise to an important question: “to what extent is liability for data breaches covered by a CGL or other sort of insurance policy?” Insurers have responded by including exclusions to mass data breaches in their CGL policies and offering separate plans (with high premiums) to cover such an event. However, insurers face a problem in drafting these policies because there is a lack of judicial information about how these policies will be interpreted by the courts. Without a thorough case history, insurers cannot confidently draft these policies to exclude (or price in) certain high-risk practices.
In this vacuum, several aspects of cyber liability require resolution. A short list of issues will illuminate the problem.
The definitional boundaries of exactly what is meant by cyber liability or loss is a basic systemic problem. The range of possible types of losses already seems daunting. It does not bode well if the insurance industry and policyholders face scores of coverage cases regarding cyber liability or loss coverage issues that seem only limited by human ingenuity.
Will exclusions for cyber liability or losses be effective? The insurance industry’s odyssey with respect to the pollution exclusion suggests that a trial and error approach spanning 20 years is not a good idea.
Are coverage provisions regarding cyber liability and losses effective? If so, do they affect the basic duties to indemnify and defend?
This paper addresses the three issues above with the aim of providing a framework for resolution.
Leo P. Martinez

Cybersecurity and Environmental Impact: Insurance as a Better Protection Mechanism for Liability from Incidents in Oil and Gas Operations

The globalisation of environmental risk poses a mounting challenge to policy makers. We are nowadays faced with a situation whereby the rules of responsibility for harm production remain underdeveloped, in spite of the negotiation and implementation of numerous international environmental agreements. In addition, those agreements lack detailed provisions stipulating the responsibility of state and non-state actors for environmental damage and state practice often reflects a widespread reluctance to pursue environmental liability through inter-state claims and a preference for increasing the importance of private liability attached to operators of risk-bearing activities as the main mechanism for progressing environmental liability.
Kyriaki Noussia

Autonomous Vehicles and Transportation


Autonomous Vehicles: Legal Considerations and Dilemmas

Autonomous vehicles pose ethical and legal dilemmas when it comes to their driving. One of the many arising issues is how to programme crash algorithms in autonomous vehicles. By the time we will have reached the point where it will be possible to purchase fully automated autonomous vehicles, these will be the end product of a long and—at least at present—still unfinished process of gradual automation. The potential of mass sales of autonomous vehicles in the near future will also mean the start of a new era in road traffic circulation. This paper examines legal issues that arise in relation to the driving of autonomous vehicles in public circulation modus, and discusses certain considerations and dilemmas that are likely to be posed.
Kyriaki Noussia

Will Autonomous Cars Put an End to the Traditional Third Party Liability Insurance Coverage?

It happened. Self-driving cars left the field of imagination and became a reality. They can be seen not only in the news but also in some countries already in the streets. After millions of kilometers of driving tests, together with large investment in this new technology coming from several companies such as Tesla, Volvo, Ford and GM, no doubt that this upcoming reality will reduce the number of accidents in the very near future, making autonomous cars much safer than those driven by humans. A report from consulting firm McKinsey & Company, estimates a reduction of 90% of the accidents that would save about USD 190 billion in cost of roadway crashes just in the US.
However, until we have a world with only driverless cars on the streets, we will be experiencing a mixed environment, where misfortunes can still happen, as shown in the accident with a Tesla vehicle equipped with the Autopilot technology that ended up by killing Joshua Brown, a 40-year old from Ohio, back in May 2016. Therefore, if accidents can still happen, who should be liable when an autonomous car is involved and which insurance policy will respond to cover the extent of the damages? In other words: When there is no human behind the wheel and the machine simply chooses the path of those involved in a car accident, will the owner of the vehicle still be held liable or will liability be transferred to the equipment manufacturers when the system fails?
Autonomous cars technology will definitely change the focus of an insurance coverage that involves billions and billions of dollars in premium and indemnities every year: Motor third party liability. Currently, most car accidents are caused by human mistakes; therefore, the person that has caused the damage is obliged by law, in most jurisdictions, to pay for the consequences. However, when it comes to self-driving cars, after an accident, there will be enough discussion on liability field to define who should be held responsible and consequently car insurers might shift their traditional business model. The transition from human driver controlled vehicle to autonomous machines that circulate in public streets still lacks supporting legislation and clear liability definition rules. This paper aims to explore the legal implications of driverless cars and impacts on liability, from an insurance perspective, and discuss possible future scenarios for the motor third party liability insurance coverage.
Viviane Mardirossian

Ethical Issues, Cybersecurity and Automated Vehicles

The digitalization of mobility and the associated increase of data are creating new requirements to be met by vehicle safety and infrastructure in a way to satisfy the requirements of the protection of personal rights and freedoms of data subjects. Automated and connected autonomous vehicles and driving systems (CAVs) require clear cybersecurity and data protection requirements. CAVs are under the obligation to perform their functions safely and reliably across national borders. As the automation and interconnectivity of driving functions increases, the issues of data encryption and cybersecurity will become more important. The rights to individual mobility data, which will emerge, will accordingly need to be clearly regulated.
This chapter aims to show the benefits and threats associated with the use of automated cars, starting from the definition of automation and self-learning machines. Interventions are reported in terms of legislation and guidelines in Community law. The chapter discusses ethical issues in relation to the use of autonomous vehicles (AVs) and cybersecurity aspects affecting the use of AVs. The chapter concludes by highlighting the importance of giving relevance to the decision-making autonomy of machines in regulation.
Sara Landini

A New Era, a New Risk! “A Study on the Impact of the Developments of New Technologies in the Shipping Industry and Marine Insurance Market”

The shipping industry is currently living in full its digital era, which is characterised by the increase of technology used in all its sectors. Although this era is highly praised among ship industry stakeholders, as it is said to optimise services, reducing the number of incidents and consequently reducing costs, it is also consider a grey area since the risks associate to it are still relatively unknown and yet to be accessed. To an industry that relies heavily in insurance, such as shipping, the necessity to analyse these risks is eminent. This chapter attempts to tackle how these new developments brought by the shipping digital era can fit into the current marine insurance legal framework.
Julia Constantino Chagas Lessa, Belma Bulut

Probing Civil Liability Insurance for Unmanned/Autonomous Merchant Ships

The operation of unmanned/autonomous merchant ships in the shipping industry will be evolutionary, but every new development unavoidably brings along with it new risks. This paper aims to acquire a full and comprehensive understanding of several fundamental issues related to civil liability insurance for unmanned/autonomous merchant ships. It concludes that although no significant legal barrier can be identified, certain non-marine insurances seem necessary to fill in the gaps for insurance cover for unmanned/autonomous merchant ships.
Ling Zhu, Richard W. W. Xing

Smooth Sailing or a Risky Expedition: A Critical Exploration into the Innovation of Unmanned Maritime Vehicles and Its Potential Legal and Regulatory Impacts on the Insurance Sector

Over the years, technology has continuously evolved to create new and innovative products that have a tremendous impact on global business, trade and commerce. In the transportation industry, technology has been developing and evolving to introduce various automatic vehicles. In the motor vehicle industry, many car manufacturers have been investing significantly in developing unmanned ground vehicles such as driverless cars and similarly in the airplane industry, unmanned aerial vehicles also known as drones have been flooding the consumer and commercial markets. It is thus unsurprising that in the maritime sector, several shipping manufacturers are currently exploring, developing and designing unmanned maritime vehicles also known as unmanned maritime vessels or autonomous vessels. These vessels sometimes colloquially referred to as “ghost ships” are expected to replace the need for a master and crew, which are traditionally found on conventional manned vessels. These vessels are expected to revolutionise the shipping industry in the very near future. As unmanned vessels are a relatively new phenomenon, there is not a large amount of academic discourse generally on the topic and as such very little has been written on its potential impacts specifically on the insurance sector globally.
This chapter embarks on a critical expedition into the innovation of unmanned maritime vehicles and its potential impacts on the insurance sector. To effectively do so, this chapter critically examines the benefits that can be derived from the use of unmanned vessels juxtaposed against the drawbacks to the insurance sector. This chapter also critically assesses the new risks posed to the maritime sector and the wider society from the use of unmanned vessels and proposes ways in which the insurance sector can develop products and policies or amend existing products and policies to lessen these risks. This chapter further critically discusses how the insurance sector should address the issue of liability as it relates to maritime incidents and accidents that are likely to arise from the use of unmanned maritime vehicles.
This chapter also embarks on a voyage that explores whether selected international maritime conventions are in their present state able to regulate unmanned maritime vehicles so as to afford protection to the relevant stakeholders. In this respect, the author also assesses whether these international conventions are in need of reforming or whether new international conventions need to be implemented so as to offer regulatory support to the insurance sector against the risks posed by unmanned vessels. In this respect, this chapter also examines how regulation at the national level can be used to assist the insurance sector manage the risks posed by unmanned shipping.
Additionally, this chapter further examines how traditional commercial maritime contracts such as the charter party and bill of ladings should be drafted to cover insurance related risks from unmanned maritime vehicles. Corollary to this, the author carefully considers whether in this respect, standard form charter parties are currently drafted in a manner so that they can be used for international trade occurring on unmanned vessels. The author also considers whether the relevant clauses of selected standard form charter parties are adequately drafted to address all the various risks unmanned vessels give rise to, and considers whether there needs to be new standard charter parties developed exclusively for trading by unmanned vessels.
Shanice N. Trowers
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