8 out of 10 insurance financial services rely on spreadsheets as legacy technology persists [Boss Insurance]

insurance

The strategic priorities of the global insurance industry are changing as companies place greater emphasis on operational resilience. This is according to new research from AutoReka financial reconciliation and automation fintech.

The report, Insurance Industry Outlook 2023: Strategic Priorities, Operations, Technology and Financial Controls, seeks to understand the current issues facing the insurance industry today. This is in addition to identifying key trends. The survey was made up of over 500 mid-level professionals working in insurance companies in the UK and US.

It revealed that more than a quarter (26%) of respondents have focused on customer experience, acquisition and retention, and back and middle office optimization over the past two years. However, over the next couple of years, companies plan to scale back their efforts in these areas. Instead, they seek to ensure overall operational resilience.

This news comes after the CIF recently imposed new operational resilience guidelines on UK insurers and US regulators have reconsidered their approach to the issue.

Comparison of insurance trends in the United States and the United Kingdom

The report also revealed that US insurance companies have done more to optimize financial operations than their UK counterparts. Thirty percent of US respondents said they “strongly agree” that their organization has optimized and streamlined its financial operations. This is compared to just over 20% of UK respondents. This could explain why insurance professionals in the US are more likely to report that their business is very profitable than in the UK.

However, over the next two years, 42% of UK businesses plan to streamline their financial operations as a priority. This doubled from the previous two years. Only a third of US respondents said the same.

The survey also revealed that US insurance companies have more agile back-office systems than their UK counterparts. Probably, because they were also quicker to adopt new technologies. US companies are more active in reviewing their back-office systems, with 30% saying they do so at least every six months. This is compared to just 20 per cent of UK businesses. The general trend, however, is that they view updating back-office technology as a major resource drain.

Challenges for the sector

Brokers face more complex processes than any other subsector. Nearly two-fifths (38%) of companies consider process complexity to be a significant operational challenge. This figure drops to half (51%) for brokers. Responses also highlight efforts to overcome problems: About eight in 10 (78%) plan to streamline their operations in the next two years.

Additionally, the survey reveals that three-quarters (75%) of insurance companies recognize that legacy technology is negatively impacting their operations. Over the past two years, companies have primarily focused their technology investments on finance and accounting. This has largely been driven by regulatory requirements such as Solvency II and IFRS 17. However, this is unlikely to continue with technology budgets for 2023 and 2024 favoring accounts receivable and automation of operations.

Legacy systems are hard to eliminate

The global insurance industry still has a long way to go before fully embracing automation. Spreadsheets are still popular for financial controls. More than a third say they rely on Excel for reconciliations. And 85% of companies said their financial departments are using spreadsheets even more extensively.

For 40% of respondents in the UK and US markets, faster processing times are the main driver of automation initiatives. But the drivers differ by sub-sector. MGAs and life insurers say automation would give them greater confidence in data. Meanwhile, reinsurers say it would improve their overall efficiency.

Gordon McHargCEO of AutoRek, commented on the report’s findings: “Companies have faced and will continue to face many challenges over the next few years. Both from an external market perspective and from a competing business processes The level of preparedness of companies to meet the challenges discussed throughout this report will determine their success in the months and years to come.

“It is promising to see companies continue to invest in technology in finance and operations departments. This often played second fiddle to frontal enhancements. Adopting the latest advancements in technology and automation is critical to the success of insurance organizations. The question for most will be deciding which areas to focus investment on, especially given the highly specialized nature of the insurance industry.

Piers williamsHead of Insurance at AutoRek, added: “Choosing the right overall strategic goals is far from a simple task, especially with insurance businesses balancing multiple competing demands. The back office is really the driving force. that drives any finance organization and inefficiencies in this area are detrimental to the bottom line and ultimately the customer-facing business.

“We hope this report will help to help insurance companies prepare to overcome the challenges of the coming years and highlight potential opportunities.”

  • Francis Bignel

    Francis is a journalist and our senior LatAm correspondent, with a BA in Classical Civilization, he has a specialized interest in North and South America.