RegTech in Insurance
Editorial by Rick Huckstep
Imagine a world where insurers do not need to be regulated. Where they treat customers fairly, only sell them what they need and always have enough money under the mattress for a rainy day.
This is how I imagine the world when insurance first started out. When communities grouped together to support each in times of trouble. Insurance was a trusty safety net. But that‘s being idealistic and the world of insurance isn’t like that (anymore).
The commercialisation of insurance has brought with it mis-selling, bad practice and conflict of interest. Which is why the need for rules exists within every jurisdiction of the global insurance marketplace. Ironically, the cost of compliance has added a massive burden to insurers. Seen as a sunk cost, this is expensive effort to (simply) satisfy the regulator.
But now, there’s a new wave of technology solutions that change this. Borne out of Fintech, then InsurTech, this new breed of start-ups are labelled RegTech. In my article for this edition of InsurTech Insights, I look at two of them, Recordsure and CoVI Analytics. Both firms providing technology driven platforms that make compliance a source of business value, not just regulatory necessity.
In KPMG’s article this month, Murray Raisbeck and Paul Brenchley make a similar case. That RegTech is more than simply a compliance tool. The ability to turn big data into “smart data” delivers enhanced business value, over and above regulatory objectives.
A different perspective was put to me recently by Duncan Minty, an ethics consultant specialising in insurance. He told me, “When insurers use RegTech, they need to remember that regulations exist to deliver consumer outcomes like fairness and trust. Better compliance will of course improve that journey, but only if it doesn’t expose the firm to new risks, through a temptation to see compliance as a fine line that can be steered ever closer to.
“After all, fairness is pretty multi-dimensional, and trust is founded on a tricky thing called ethics. Is that ‘fine regulatory line’ so clear? And if regulations now put the emphasis on leaders showing judgement, does it even exist? So insurance firms shouldn’t be tempted to turn on any form of RegTech autopilot.
“The course towards fairness and trust positions compliance within a bigger picture, with more systemic challenges like getting ethical culture right.”
Duncan makes a good point that I agree with. And if you ask me, a more strategic issue for RegTech to help insurers with is algorithmic accountability, which Duncan explains better than I can on his ‘Ethics and Insurance’ blog.
Digitally yours
Rick
RegTech startups make Compliance simple and cost effective - By Rick Huckstep
The latest solutions from RegTech startups do more than simply keep the executive out of prison or the shareholders free of billions in cost. They also do more than simply digitize a process. RegTech startups are turning the massive burden of compliance into a source of real business value.
KPMG Perspective - Regtech embedded in insurance transformation - By Murray Raisbeck & Paul Brenchley
In the face of new competition, rapidly evolving business models, and the proliferation of innovative technologies, change is becoming the status quo for insurance companies. While insurers recognize they have an imperative to innovate, they are often stymied by the need to address ongoing regulatory challenges