The impact of technology innovations on the governance of insurance firms : a literature review

Abstract

Following the latest financial crisis starting in 2007/2008, stricter regulations and supervision concerning corporate governance was enforced, especially on the financial services sector including the Insurance industry, in the belief that failure in corporate governance of financial institutions led to their demise. This has disrupted the insurance firms and in turn, may have adversely influenced the economy possibly stifling creativity and innovation. International principles and standards on practices adopted resulted in a trade-off between stricter supervision of the sector, carried out by placing more responsibility on boards of directors to oversee the undertaking and its management. The aim of this is to ensure that these institutions do not take on excessive risks and work within the appetite and tolerance of the shareholders. However, insurance institutions' risk-taking is essential for development and sustainability and over-emphasis on inflexible prescriptive requirements/policies may constrain wealth maximization since this may foreclose risk-taking and in-turn threatens systemic stability and profitability in the longer term. Since good governance is driven by the interplay of internal and external dynamics and generalizable data that can test these concepts on performance have been scarce, we will lay out in this article the results of a systems view of governance using the case of technological innovation disruptions on the Insurance Industry governance. We will help fill this gap by carrying out an analysis of literature focussing on four themes (that is, Operations, Internal Control, Oversight and supervision and Policy and Decision Making) ensuring effective governance.