If the federal government goes forward with giving fintechs increased access to consumer financial transaction data, this could encourage large tech players like Amazon and Facebook to get into the insurance business, a Canadian P&C expert suggests.
“Nobody ever thought that Facebook would somehow be influential in elections. I think insurance is no different,” said Steve Masnyk, a long-time insurance lobbyist and current managing director of the Canadian Association of Managing General Agents.
Masnyk was commenting on how open banking could change how insurance is sold in Canada.
In an interview Tuesday with Canadian Underwriter, Masnyk said it’s possible that a large tech company like Amazon would want to get involved in the insurance business if Canada moves forward with consumer-directed finance.
Federal Finance Minister Bill Morneau appointed the four-member Advisory Committee on Open Banking in 2018. In January 2020, that committee recommended that the federal government promote what it calls “consumer-directed finance.” The idea is to help consumers benefit from a broader range of financial products and services by giving fintechs and other financial service providers increased access to consumer financial transaction data, which the fintechs could use to develop products more tailored to consumer needs and preferences.
“This is actually an important topic that will have major ramifications,” Masnyk said.
It is raising a whole host of questions as to how the federal government (which regulates banks) and provinces (which regulate the market conduct of brokers) are going to oversee fintechs that are involved in placing insurance.
“If [tech firms] are selling insurance, they need to be regulated somehow as insurance players,” said Masnyk.
“How do the Amazons or the Googles or the Facebooks of this world get regulated? All three of those players are involved in financial services and will be even more in the future. It is just a matter of time before they dabble in insurance.”
In its 2020 report, the Advisory Committee on Open Banking recommended that the federal finance department publish a white paper on a proposed consumer-directed finance framework for further consultation with stakeholders.
Consumer-directed finance could enable fintechs to use information to secure better rates or products, manage their small businesses more easily or access financial services not traditionally available to them, the committee said in the report.
The committee also warned that sensitive financial information needs to remain secure, private and in the control of the consumer. There are concerns that an increased number of participants dealing with financial information could increase the risk of cyber-attacks and data breaches.
“The government has to be very cautious how they put together an open banking framework,” Masnyk said. “Bar none, nobody has as much data on you as your bank.”