Managing data to comply with regulation

From the new IFRS 17 international accounting standards to the General Data Protection Regulation (GDPR) and Insurance Distribution Directive, insurers need to focus on effectively managing their data to ensure they don’t end up falling foul of burdensome regulations.

“There is more scrutiny from regulators and auditors who are demanding a deeper look into the business, as well as making sure that the numbers being reported externally are correct. They’re not only looking deeper into data, but they want to do it on a more frequent basis,” says Mike Kelly, insurance sector lead at AutoRek, a leading provider of financial, operational and regulatory reporting software.

In a recent conversation Mr Kelly had with a large insurance intermediary, he found that they were having more regular audits. The firm was simply unable to perform audits on a regular basis, due to the huge data and operational challenges, as all data was reconciled manually and all reports were created on Excel.

“It’s just not the right type of environment to be handling such a large and detailed amount of data, especially as the level of audit scrutiny grows,” says Mr Kelly. Long-established insurers that are lumbered with legacy systems are particularly at risk of facing difficulties in meeting regulatory requirements, as they have been hesitant in embracing new digital technologies, and many still use paper contracts and remittance advices to document their business.

The work needed to digitise data can be time consuming and human error during this process can open up insurers to considerable fines for non-compliance, especially around GDPR breaches. One of AutoRek’s clients, a large Lloyd’s insurer, had grown by acquisition and through the launch of a range of products, which had created a patchwork of systems with little ability to reconcile about 30 years of policy data correctly.

“They couldn’t even attempt to reconcile because the data was in such a poor condition. We are working on reconciling potentially hundreds of thousands of policies and uncovering errors to ensure that our client can not just show to the regulator the data is accurate, but actually explain and prove the process,” says Mr Kelly.

Insurers can then use the resulting information to better run their business, as they are well positioned to price risk and make decisions on which markets are the most profitable because the data is far more reliable. The implementation of AutoRek provides a consistent approach to apply the reconciliation framework across the business, and help deliver financial control, robust governance, data transparency and granularity.

“AutoRek is an established software brand that is highly specialised with innovative development and highly experienced delivery teams at its heart. We are continually developing our software by investing in and incorporating innovations such as machine-learning, artificial intelligence and blockchain, all to make sure the solutions we offer better equip our clients to meet regulations,” says Mr Kelly.

When any errors or discrepancies are discovered, they can be addressed in real time and remedied early in the accounting cycle. As AutoRek is a scalable platform, the solution can help future-proof insurers against rising operational costs and improve often tight margins.

With effective data management becoming a key differentiator for insurers in such a competitive marketplace, the importance of adopting a comprehensive platform that has the power to resolve regulatory issues will prove vital.

“To develop these solutions in-house would be prohibitively expensive for most insurers and finding the skilled staff to manage the changes is becoming increasingly difficult. This is our bread and butter, which is why a growing number of clients are looking for us to play a central role in their infrastructure,” Mr Kelly concludes.

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