In a previous article, I talked about the InsurTech movement. That is, start-up companies developing technology solutions for insurance companies. One place insurance companies need help with is complying with new regulatory requirements. One branch of InsurTech that is working to help address this challenge is called Regtech. This article will discuss how Regtech firms can help insurers with their regulatory needs.
Since the financial crisis of 2007, the regulatory demands of insurance companies has continued to increase in complexity. A recent article in The Economist noted “the post-crisis upturn in both regulatory requirements and supervisory scrutiny means that banks, insurers, and asset management firms are spending more time and money than ever on managing compliance risk.” According to Deloitte’s 2018 insurance regulatory outlook report “state departments of insurance (DOI) continue to focus considerable resources to market conduct exams and analysis. While many of the areas of focus aren’t new…some are more recent and gaining more attention (big data, cyber security, vendor/third-party administrator (TPA) management.)” The Deloitte report then states that “we’re seeing states move toward a more data-driven and analytical approach to market conduct, leveraging information from financial statements, rate, and form filings.”
Therefore, it’s not just about insurers complying with new types of regulations, it’s about insurers’ meeting new data requirements in order to ensure successful compliance. This is where Regtech comes in. The Economist describes Regtech companies as firms that “apply technologies to the regulatory challenges faced by prospective financial clients. What Regtech providers have in common…is that they seek to automate the compliance processes.”
Regtech solutions will allow compliance staff to apply their expertise on more complex regulatory issues. As the Economist notes “It’s just more efficient to leave the routine work to technology and put humans to work on exploring the alerts and exceptions… which require further analysis.” Where Regtech can be especially useful is addressing the aforementioned data requirements of new regulations. A recent article from consulting firm KPMG notes “Regtech solutions can more effectively structure and find meaningful patterns in the copious data available within insurance companies. This means that insurers can gain better insights into their regulatory practices, automate complex reporting, conduct meaningful analyses of critical compliance risk areas, and create an end-to-end view of compliance and reporting.” Lastly, Regtech can help carriers develop better outcomes on an enterprise-wide level. Regtech can “integrate various functions – risk, finance, regulatory reporting – more tightly to facilitate holistic, strategic thinking that puts a greater emphasis on where business is going than on where it is now.”
Regtech solutions can help insurance companies streamline their regulatory processes and develop value-added solutions to their compliance needs. In a world of ever-growing regulatory complexity, Regtech has the potential to provide tangible benefits to insurance companies.
 Deloitte “Navigating the year ahead 2018 insurance regulatory outlook” Deloitte December 2017