InsurTech was an insurance buzzword in 2016, and that’s likely to continue next year when it will permeate almost every aspect of U.S. industry, according to a prediction from international law firm Clyde & Co.

Clyde & Co.’s insurance team has published a list of predictions for 2017, which Carrier Management is summarizing. Part 1 focused on mergers and acquisitions and Brexit, while Part 2 addresses InsurTech, directors and officers in Australia (a D&O claims hotspot), and the growing interest in cyber insurance in India.

In his piece on InsurTech—the innovative use of technology in insurance—Vikram Sidhu, a partner in the law firm’s New York office, said the insurance industry in the past has been slow to embrace technological innovation.

However, for most of 2016, investment in InsurTech outpaced investment in other areas of fintech, said Sidhu.

He noted that examples of InsurTech innovation ranged from the launch of the peer-to-peer insurer Lemonade in New York for home insurance to the sale of drone insurance via a mobile app by Verifly.

“In 2017, entrepreneurs, investors, existing insurers and other players in the insurance industry in the U.S. will intensify their efforts to bring innovation and modernization to the sector,” he continued.

Such developments will have an effect on every part of the insurance industry, although there will be a particular emphasis on personal lines, including sales and marketing, underwriting and claims administration, Sidhu said.

In order to avoid stifling such innovation, state laws and regulations will need a rethink, “as many were formulated to address the sale and administration of insurance in ways that will cease to be relevant,” he cautioned.

“In the longer run, InsurTech developments might even put pressure for more federalization of insurance regulation as new technologies will have a greater nationwide reach, such that state-level regulation of insurance may become increasingly difficult to administer.”

Singapore’s InsurTech Sandbox

Another InsurTech prediction for 2017 came from Ian Stewart, a partner in the firm’s Singapore office, who penned an article titled “Singapore’s sandbox will support InsurTech surge.”

Stewart also affirmed that regulation was key to growth in the InsurTech arena, which is why the Monetary Authority of Singapore (MAS) has moved to promote innovation in order to enable more ground-breaking ideas come to fruition.

“One of the biggest hurdles facing the industry in pursuing InsurTech-driven innovation is the challenge of bringing such developments to market amid a regulatory landscape that does not always provide the kind of flexibility necessary to accommodate new concepts,” Stewart said.

To overcome such hurdles, the MAS recently introduced a “Fintech Regulatory Sandbox,” which will enable all financial institutions and technology companies “to experiment with innovative financial products or services in the marketplace” within a “well-defined space and subject to appropriate safeguards.”

This will ensure that any negative consequences are contained, preserving the safety and soundness of the financial system, he explained.

“Significantly, the MAS has confirmed that it will provide appropriate regulatory support, including by relaxing its own specific legal and regulatory requirements, where they may inhibit the development of a sandbox project,” Stewart continued.

He cited several signs indicating that this initiative will gather momentum in 2017. “In the short time since its launch, the MAS has already received a number of applications for participation in the Fintech Regulatory Sandbox, and it recently bolstered the program with the release of a detailed set of regulatory guidelines to provide potential applicants with further details of how the initiative will operate,” Stewart said.

In addition, he added, at Singapore’s inaugural Fintech Festival held in November 2016, over 20 innovation labs, established by insurers, banks, technology companies and others, opened their doors to the public.

Australia’s D&O Trends

The next contribution from Clyde & Co.’s insurance team predicted that Australian directors and officers are facing a range of new emerging risks, with climate change and cyber topping the list. (Australia, Germany and the U.S. are the areas generating the most D&O claims in the world, according to Allianz Global Corporate & Specialty.)

Australian directors and officers could potentially be exposed to legal action for failing to properly account for the impact of climate change on their businesses, said Dean Carrigan and Yvonne Lam, partners in Clyde & Co.’s Sydney office.

“This risk is set to become a hot topic for discussion in 2017, following the recent release of a legal opinion from a prominent Australian barrister which concludes that climate change risks would be regarded by the courts as being foreseeable and therefore relevant to a director’s duty of care and diligence under Australian law,” the partners said.

They explained that climate change is a D&O issue for industries such as insurance, energy and commodities, where the company would be directly affected “by the increase in the frequency and severity of extreme weather events linked to climate change.”

Cyber risks also will move up the list of D&O priorities with the expected introduction of mandatory data breach legislation in Australia in 2017, the partners said, explaining that the law would enhance the potential for financial exposure and reputational damage for the company and directors, who may also incur personal liability.

“Directors will need to ensure that robust cyber resilience frameworks are embedded in their companies, consistent with the expectations of Australia’s corporate regulator,” the partners said.

India’s Cyber Insurance Market

Cyber risks also are rising up the awareness scale in India, where a recent high-profile data breach is resulting in “an uptick in demand for affordable cyber protection.” This was the prediction of Vineet Aneja, a partner in Clyde & Co.’s Mumbai office.

Aneja was referring specifically to the data breach at a number of major Indian banks, which compromised the security of an estimated 3.2 million customers in one of the country’s largest cyber attacks.

As a result of such incidents, he said more insurers are recognizing the scale of the opportunity and looking to launch new cyber insurance products.

While the number of providers of cyber cover in India has been limited, an increasing number of Indian insurers are including it as part of their treaty arrangements, Aneja explained.

Many domestic insurers “will seek collaboration with foreign insurers—who have greater experience and capacity in writing cyber insurance business—for reinsurance and underwriting support,” Aneja affirmed.

Tomorrow’s Clyde & Co. predictions include more details of business opportunities in global markets.