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Managing compliance and regulations: Charles Taylor InsureTech

How do insurers stay on top of a changing landscape of compliance and regulations? Tom Maleczek, Client Solutions Director at Charles Taylor InsureTech, examines the challenges facing the industry and why new solutions are needed.

In any regulated industry, compliance with regulations is a big challenge. Non-compliance can mean a company's licence to operate is taken away and the burden of compliance increases as regulations change over time. 

If you take insurance, there's been a spate of new regulations imposed upon organisations recently. As business becomes increasingly global, the industry also needs to deal with variations across geographies, products and covers. The ability to respond rapidly to changes has become a key part of compliance. 

The emergence of new technologies that assist compliance is part of the solution, but companies might have 10, 20 years of manual activities in place for managing regulations. That dependence on people-based processes brings further challenges around human errors, auditability, and the cost and effort of being able to prove compliance. 

Paying the penalty 

There's a massive impact from getting it wrong. One large insurer was fined over £4m in 2014 for having inadequate systems and controls, and we've worked with another global insurer that received a seven figure fine for failing to be able to sufficiently demonstrate their controls being in place. 

If you look at the FCA, which admittedly covers a broader spectrum than just insurance, just under £400m worth of fines were imposed on organisations in 2019. That's five to six times the amount in 2018. 

What it indicates is an increase in scrutiny, the ability to identify breaches, and a willingness from the FCA and other authorities to impose sanctions and penalties. 

Missed opportunities 

There is an opportunity to address some of the more common regulatory shortcomings through augmenting business processes or completely digitising them to reduce risk, improve transparency, and provide the controls and reporting needed to appease senior management and regulatory authorities. 

Processes drive standardisation and continuity in how organisations operate. They also facilitate the imposition of controls that when implemented enable a business, rather than hold it back. 

In the context of delegated business opportunities, not having clear processes internally and with counterparties means business gets held up. If that happens, someone else might write the business or it withers on the vine and the opportunity goes away.

Pressures around compliance also mean that organisations end up with false positives or negatives in processes, leading to some good business being rejected. 

An organisation should not be walking away from suitable business because its processes don't allow it to commit in a timely or correct manner, or because the business presents to the wrong part of the organisation with the wrong information, setting off flags that identify it as a referral or business that can't be written.

That's where the right technology can help. It removes emotion or subjectivity and provides a framework that enables opportunities to be handed over to the next best action.

Tools of the trade

It's not the case that organisations aren't doing compliance work, they're doing it to the best of their ability. Most recognise that they need a quicker, better, more cost-effective way, but meaningful improvements mean changing established ways of working and business processes. 

The usual tools used to manage delegated authority letters, and their underwriting and claims processes are Excel and Word, with possibly some workflow tools involved. 

The reason we built our Authority Hub product was that new technologies exist to handle those particular activities in a more efficient way, and we couldn't find anyone else making use of them yet. 

By using Authority Hub, organisations can manage any type of authority from one central location and produce updates in real-time. It gives a single, clear picture of compliance across a business, automating the flow of authority changes to reduce the amount of manual work involved. 

An average large insurance carrier will spend between 1 and 20 days a month collating spreadsheets to prepare basic reports on how many authority letters are outstanding. Authority Hub can provide that information in two minutes. 

Improved efficiency is a key driver for us. We want to provide a set of tools and experiences to augment and, where possible, automate business processes that capture data and generate the reports to help insurance organisations adhere to regulatory compliance.

Collaboration

Working collaboratively with the market is vital to creating solutions that work. For example, our Tide platform is being used as part of DA SATS and now DDM in the London market. We worked very closely with Lloyd's and LIMOSS to understand their requirements and nuances to build a product that reflected and met their needs. 

When we take in third party or delegated business through the platform, we're ensuring that real-time, accurate data is being passed between the carriers, brokers, MGAs, or cover holders selling and managing insurance policies. 

We've taken a similar approach with Authority Hub, gathering insights and feedback from strategic partners in the industry. Those partners influence everything that we create, rather than us thinking we have all the answers and just building something we think is right. 

The best way to help the market is by genuinely understanding the problems and priorities that are out there, then providing the technology solutions that meet those needs.

Published in Instech London 20 October 2020