Many US and UK companies prioritize operational stability
After spending the last few years focused on customer experience and retention, insurance companies in the US and UK are shifting their strategic focus to automating their back and middle office processes, found- is a new report.
A survey by automation fintech company Autorek shows that companies plan to focus on improving their operational resiliency over the next two years, especially amid new regulatory guidelines.
Britain’s Financial Conduct Authority (FCA) unveiled new operational stability requirements for UK insurers last year, while US regulators are re-examining their approach to the issue.
According to Piers Williams (pictured), Autorek’s global insurance lead, most insurance companies still rely on spreadsheets as part of their processes.
“There is a real drive towards automation in the insurance industry,” said Piers Williams, global insurance sales manager at Autorek.
“We see companies looking to remove manual processes as much as possible and will do so in the next few years. There is still much to do in the sector.”
Are US companies more agile than their UK counterparts?
Autorek’s survey, which polled 500 insurance professionals evenly split between the US and the UK, found striking differences in terms of each geography’s willingness to adopt new technology.
It revealed that US companies reported significantly higher efforts to optimize their financial operations than their UK counterparts. Thirty percent of US companies say they review back-office systems at least every six months, compared to just 20% of UK companies.
Across the board, however, US and UK companies agree that updating back-office technology is a significant resource burden.
“I think most legacy systems remain a significant challenge within the insurance industry, and that’s true across the UK and the US,” Williams said.
“Legacy technology has a negative impact on the operations of more than 60% or two-thirds of the industry even though there is a lot of automation and agility in the US market.”
Williams points out that the UK sector is starting to be more advanced in terms of its level of automation, compared to the US.
“Development in the UK, which is a bit more advanced, is less rapid than in the US,” he said.
The relative agility of US companies and a more focused approach to back-office automation may be linked to higher profitability, according to Autorek. US companies (over 25%) are more likely to report greater profits than their UK counterparts (over 10%).
Brokers face complex challenges amid integration
Brokers face more complex challenges in automating their systems than any other insurance sub-sector, according to the Autorek report.
Half (51%) of brokers surveyed blamed complexity as a major obstacle in their automation journey, compared to 38% of firms overall. The level of complexity in data automation is also increasing as brokers merge with or acquire other companies.
“The biggest challenge [for brokers] is the data. They rely heavily on external data, whether that’s from an insurer, reinsurer, or MGA to the point where they’re at the mercy of that external party and how they choose to share that information,” Williams said. the Insurance Business.
“When you get a new business, it’s important that you duplicate teams and knowledge systems, so you have to think about the centralization process in parallel. You’re looking to bring everything into one system, which involves an important migration process.”
Despite this, brokers are strongly motivated to streamline their operations: about eight in 10 (78%) said they will make back-office automation a priority in the next two years.
Think back office
The Autorek survey clearly shows that insurance companies are following other financial services sectors by automating their back-office operations. The pain of manual processes is also highlighted by many of the COVID-19.
“What the pandemic has really highlighted is the need to ensure that the business from an operational perspective has the architecture and processes in place to adapt to potential changes,” Williams said.
“But also, while trying to embrace that efficiency, insurance companies can increase the profitability of their business as we operate in more competitive market conditions.”
Do you agree that insurance companies prioritize back-office processes? Listen to the comments.
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