The insurance sector has gone through enormous upheaval over the last decade. Between the global financial crisis of 2008 and the ramifications of the COVID-19 pandemic, many insurance companies have focused their risk and compliance activities on protecting themselves from downside risks and meeting ever-evolving regulatory requirements.
But, over the last few years, the sector has experienced more compliance incidents than ever before, and this has resulted in compliance risk management becoming even more of a top priority. Insurance companies need a strategic approach to compliance risk in order to improve their efficiency and effectiveness.
And the pressure is mounting. Increasing regulatory mandates, demand for reduction in costs and a growing need for additional capacity in their compliance department are regular challenges companies now face.
At the same time, risk and compliance functions need to perform second-line risk reviews to help the business connect the dots on key issues. Detailed data on business performance areas like unusual claim patterns or customer retention levels can help inform business decisions. Forward-looking metrics for financial and non-financial risks, combined with regular stress testing are important to ensure the business is operationally resilient and functioning in a safe sound manner across an extended risk and compliance landscape.
Three Key Investment Areas
There are three key areas of investment for the compliance function: digitisation and tooling, skills and talent and the compliance foundation.
Digitisation and tooling refer to the use of data and tooling instead of manual labour so that resources can be used to achieve strategic goals. It requires re-engineering of core processes and automation of functions to be more proactive and predictive.
Skills and talent are the need for increased competency and knowledge, driven by the increase in laws and regulations in the sector and the pace at which they are constantly changing.
The compliance foundation refers to the business’ compliance framework. There are always opportunities for further improvement, especially in the relationship between the compliance framework and the broader operational risk framework.
Building for the Future
To execute these responsibilities, risk and compliance functions must be agile and proactive, delivering cost-effective results. Tapping into the power of advanced technologies such as cloud computing, artificial intelligence and machine learning along with automation to allow more bandwidth within the business for more profitable ventures. Ideally, there should also be a focus on modernizing the rigid legacy systems and processes that inhibit the sharing and cross-checking of data in a timely manner, which is vital to evaluating exposures.
Cloud computing can form the foundation upon which the desired flexibility is developed which, while it can be designed as a part of an in-house structure, can be cheaper and more efficient to collaborate with a RegTech provider who will already have scalable solutions to suit digital transformation goals.
APIs will facilitate smooth integration between newly developed tools and pre-existing systems.
Artificial intelligence and Machine Learning algorithms make use of real-time data streams to analyse for patterns, enhance decision making and automate time-consuming research tasks.
RegTech is the Answer
By employing the use of RegTech, improving quality and reducing costs, businesses can respond better to changing regulatory demands and apply analytics to advise business functions and determine areas of heightened regulatory risks, such as agent sales practices, rate and form filings, customer and 3rd party fraud and business operations.
The driving needs for RegTech in the insurance sector are not unlike those driving it in the financial services industry. A combination of internal challenges, regulatory pressures, resource issues and emerging technologies.
Regulatory pressures are a challenge that vitally needs addressing. The increase in the number of enforcement actions, fines and penalties shows how unforgiving and difficult to navigate the compliance landscape is. And with regulatory bodies also using emerging tech to direct their legislations, keeping up is imperative.
RegTech also allows insurance company compliance professionals to work over and around legacy infrastructure to connect and analyse information in a smarter way in order to understand where the organization may have risks and exposures based on a larger data field than was previously accessible. For example, insurers traditionally have used small sample file audits to identify potential distribution/sales channel issues or policy rating accuracy; this method would consume significant resources and could only address a limited portion of the population. RegTech and analytics may help make the process more efficient because insurers can monitor an entire population and pinpoint areas that may be problematic.
It’s not too outlandish to say that insurers’ success in modern times may boil down to how efficient and effective their compliance process is. Once that is efficient and effective by leveraging the use of a skilled RegTech provider, this helps to facilitate the overall business strategy. This becomes especially true if that strategy involves the deployment of innovative solutions which digitally transform the insurance business model and products on offer. Without a robust compliance structure and framework, there is no foundation upon which to build.
By employing a highly capable RegTech company like Sekuritance, you can build the perfect framework to complement your business and aid digital transformation, while utilising our skills and talents to help you create a strong compliance foundation.
Find out how we can help you by visiting www.sekuritance.com.
The Sekuritance RegTech platform provides a single platform for every eGRC need, including end-to-end AML/CTF, CECL, FCPA, vendor management, beneficiary onboarding, investor check, card processing MFA checks, blockchain wallet checks, cyber-risk assessments, and other RegTech or Business Process Management requirements.
Stay tuned for more info and follow us on: