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Driving Compliance Efficiency for Life Insurers with RegTech

30th September 2024

Driving Compliance Efficiency for Life Insurers with RegTech

The life insurance industry is facing numerous challenges that impact efficiency within compliance functions, including manual processes, heightened regulatory scrutiny, data silos, and the increasing difficulty of attracting skilled professionals. These inefficiencies slow down business operations, increase the risk of compliance errors, and strain resources. However, technology solutions, particularly RegTech, presents an opportunity to modernise how life insurers operate by enhancing efficiency, improving accuracy, and optimising resources.

AML compliance requirements to prevent, detect, and respond to financial crimes and money laundering activities
Compliance Challenges in the Life Insurance Industry
Manual Processes and Legacy Systems

Many life insurers continue to rely on manual workflows and outdated legacy systems to manage compliance related tasks, which limits their ability to maintain appropriate regulatory oversight and react quickly to market changes. Approximately 67% of insurance firms report that manual workflows slow down internal compliance management, resulting in increased operational inefficiency, higher operational costs and a weakened due diligence function leading to exposed vulnerabilities to non-compliance. These inefficiencies not only expose insurers to potential regulatory risks but also harm customer satisfaction, as lengthy counterparty onboarding can push clients to seek faster, more technologically advanced competitors.

Regulatory Burden

The increasing regulatory pressure has made compliance more complex, with 77% of insurance firms reporting that the regulatory burden has significantly grown over the past year. Enhanced scrutiny from regulators, particularly around Consumer Duty and Solvency II, intensifies the need for advanced compliance monitoring. In turn, this is making it essential for life insurers to adopt technology solutions that ensure they stay compliant and manage the increasing demands.

Data Silos

Data silos are another major challenge. Around 28% of insurers report that disconnected data hampers their ability to make well-informed decisions. Without centralised data management, life insurers struggle to perform accurate risk assessments. When data is spread across various systems, errors are rife and it makes accurate risk assessments more complicated. This fragmentation can lead to inconsistent interpretations and misalignment among teams, delaying responses to emerging risks and compliance issues.

Talent Shortages

With rising salary expectations in the compliance and regulatory fields, life insurers face fierce competition from other industries like finance and tech, where higher pay and more flexible work environments are standard. This trend, combined with the shift toward hybrid and remote work, has made it more challenging to attract top talent to the life insurance sector. A significant portion of life insurers also still depend on labour-intensive tasks, which dissuades skilled professionals from entering the industry. As a result, many insurers are left with gaps in critical compliance roles, increasing the risk of regulatory breaches or inefficiencies. The complexity of compliance tasks requires expertise and continuous attention to detail, so the shortage of skilled talent capable of handling these jobs is only aggravating operational pressure. With fewer experts available, life insurers may struggle to stay on top of evolving regulatory changes, which can lead to costly penalties and operational disruptions.

AML compliance landscape
Current Technology Use Cases in Life Insurance

Although the life insurance sector has been slower to adopt technology compared to other financial sectors, the market is gradually integrating tech-driven solutions across different functions to enhance operational efficiency or customer experience.

Health Tracking Devices

Wearable devices and health apps have become popular among life insurers to help customers track their health and wellness, thereby reducing risks. A number of firms offer health programs that reward customers for staying active, while the data collected through these devices informs underwriting and risk management.

Robo-Advisors

Automation is increasingly playing a role in risk assessment and policy underwriting. Robo-advisors, powered by AI, can evaluate risks more efficiently than traditional manual methods, enabling life insurers to process claims faster and reduce operational costs.

Underwriting Risk Analysis

AI and machine learning are transforming underwriting by providing faster and more accurate risk assessments. Predictive analytics are helping life insurers automate decision-making, reducing the time required to issue policies while improving the precision of risk evaluations. This use of technology allows life insurers to create more competitive and personalised pricing strategies.

How RegTech Enhances Efficiency

Alike these technologies, RegTech also has the ability improve efficiency within compliance functions for life insurers – from eradicating manual processes to improving team cohesion and speeding up the onboarding of counterparties.

Optimised Team Cohesion

RegTech solutions facilitate the seamless sharing of information across departments, breaking down data silos that limit collaboration. With centralised platforms, life insurers can ensure all relevant teams have access to the latest regulatory information. This cohesion reduces errors, streamlines decision-making, and allows insurers to react more quickly to regulatory changes or market demands, improving both operational efficiency and customer outcomes.

Streamlined Counterparty Onboarding

RegTech plays a critical role in speeding up the onboarding of new counterparties, a crucial area for life insurers who depend on external markets to maintain capital reserves. Automating due diligence processes such as AML screening, credit checks, and regulatory assessments reduces the time needed to onboard new partners. Partners are onboarded more efficiently and with greater accuracy by leveraging RegTech’s real-time data capabilities and sophisticated document exchange systems to issue onboarding documents such as TOBAs. In turn, life insurers can access revenue more swiftly, leading to improved cash flow and a significantly enhanced overall customer experience.

Optimisation of Full-Time Employees (FTEs)

Leveraging RegTech for compliance efficiency also plays a crucial role in alleviating the talent challenges by automating labour-intensive tasks like AML screening, regulatory reporting, and partner onboarding. This reduces the need for full-time employees to manage these processes manually, allowing insurers to redirect their existing talent toward more strategic and value-added activities like risk assessment, customer experience, and strategic planning. Automating these critical functions ensures that intellectual waste, where highly skilled professionals spend time on mundane, repetitive tasks, is minimised, freeing them to concentrate on higher-impact roles that enhance both compliance accuracy and business growth.

Moreover, automation in compliance reduces the burden on overstretched teams, enabling insurers to maintain regulatory accuracy without needing to constantly expand headcount. This helps insurers stay compliant even with a smaller, more focused workforce, addressing the talent gap while enhancing operational efficiency.

accelerating efficiency in regtech
Conclusion

In conclusion, life insurers must acknowledge the vital role of technology investments in strengthening their compliance functions. As regulatory demands grow more complex, the responsibility of maintaining compliance has intensified significantly. Relying on outdated manual processes is no longer feasible and adopting innovative solutions such as RegTech has become essential to effectively manage this increasing regulatory burden. By automating and streamlining compliance processes, life insurers can better meet regulatory requirements while improving operational efficiency. This transformation allows for quicker responses to regulatory changes, reduces operational risks, and enhances the overall customer experience.

 

As the life insurance sector adopts various technology driven solutions across different functions, ranging from health tracking devices to AI-enhanced underwriting, the commitment to innovation must also extend to compliance. Now is the time for life insurers to embrace RegTech as an opportunity for growth and resilience. With IT spending in the insurance sector projected to grow at a CAGR of 8.1% from 2022 to 2027, driven primarily by a 12.1% increase in software investments, the life insurance industry has a clear and promising path ahead. Firms that prioritise investments in compliance technology will not only navigate regulatory challenges more adeptly, but will also position themselves as agile and forward-thinking entities in the industry, leading to a competitive advantage.

This article was published by:

Article author:

Manal Tjiou

Manal Tjiou is the Marketing Executive at REG Technologies. With a passion for digital marketing and creative strategy, she’s commited to increasing our brand awareness and thought leadership in the industry, ensuring our content resonates well with our audience.

020 3946 2880

info@reg.uk.com

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