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Reinsurance: a huge need for process modernization

Modernizing reinsurance processes: a necessity for insurance players

Published on June 2, 2021
Reading time: 5 min
Maud Tezenas du Montcel

Reinsurance is an industry based on a strong expertise that has long held in check the successive waves of digital transformation that have hit other sectors, like traditional insurance. The globalization of flows and the increasing complexity of products places it in front of new challenges regarding efficiency and modernization.

Considering what’s at stake, the good old Excel spreadsheets filled out manually are no longer sufficient ... even if they are still (too) widely used! To avoid being overwhelmed by operational costs and by competitors, the (only) solution involves a complete modernization of processes, and in particular the implementation of intelligent and more fluid digitization, to support collaboration. Focus.

Reinsurance: a complex framework that makes modernization necessary

As you know, reinsurance is a separate field within the insurance ecosystem. Because reinsurance operations are carried out in a specific  framework, perceived as remarkably complexe, due to:

  • the multiplicity of actors involved (ceding company, reinsurer, broker, captive, etc.),
  • the globalization of financial flows, with a strong geographical variety of operators, subject to local specificities,
  • the fragmentation of flows and their high technicality (multiple frequency, diversity of products, types of treaties, etc.),
  • the high stakes during accounting circularization or audits, etc.

This growing complexity makes it necessary to modernize reinsurance processes. Yet too many players are waiting for things to happen by themselves, especially through data standardization. In this regard, the Ruschlikon initiative, which is based on ACORD standards (promising greater efficiency and faster cash management), has been raising hopes for a decade. In 2015, the industry recorded a 20% increase in accounting and claims processing operations in ACORD (Scor) format. However, this progress is slow beyond a certain threshold, and its democratization is proving to be complex given the heterogeneity of the processes, working methods and areas of activity concerned.

In the end, waiting for a normative upheaval is akin to an arlesian, and it is preferable for organizations to commit themselves to a process of modernizing their reinsurance operations. This is clearly no longer an option: it is in the interest of the teams to improve performance and speed in order to satisfy their partners and meet the challenges of cash management. Even if it means getting ahead of the expansion of ACORD standards in the future, thanks to a digital transformation already well underway.

Changes that struggle to take hold

Nevertheless, the rate of digitalization remains low in this sector: operations still rely heavily on document exchanges (Excel spreadsheets, PDF files), mailings and telephone/visiophone conferences. Outdated methods that result in accounting errors, delays and non-compliant processes. Why isn't this modernization being embraced by the reinsurance industry?

First, it's a matter of habits. Collaboration is mainly by email and telephone, in some cases through document filing portals. Most insurers and reinsurers are equipped with adapted accounting tools, but they are not fully digital solutions. The result is scattered data, rarely up-to-date (because it exists in several versions of the same documents), worthy of a puzzle to be put back together; and formal validations that are (almost) impossible to trace, leading to litigation and the subsequent discovery of compatibility discrepancies.

Second, because of the complexity of the reinsurance process. Managing accounts requires operators to integrate data from multiple sources, products, sectors of activity and information systems, which are inevitably heterogeneous. The quality of this data suffers, when it is not simply unusable. The complexity is such that automation is made very difficult, and operators still prefer to rely on manual manipulation and revision - this is the case for 60% of them (Deloitte study).

Finally, because the sector is suffering from a massive underinvestment syndrome when it comes to digital tools. Operators need to catch up on several years of backlog and address a significant imbalance in technological maturity. An imbalance that has led to data being collected in silos, with little communication between applications and IT environments.

Reinsurance process: the road to modernization

The path to modernization runs in two parallel directions: the digitalization of all reinsurance processes and collaboration for better data quality. In both cases, humans are at the heart of the system.

  • The digitalization of exchanges is a necessity: the coexistence of multiple tools of varying degrees of modernity (from email to conference calls to document submission portals) has created numerous breaks in the process. The result is manual re-entry steps, which are themselves prone to errors, tedious consistency checks, and even worse at the end, discrepancies between submitted and accepted accounts. It is now necessary to be able to follow a process from its initiation to its closing and to be able to share the progress and validation steps with internal and external partners in a single solution. The immediate benefit is the ability to measure the actual performance of your operations and identify the causes of non-quality or delays.
  • Collaboration is the other key pillar of your transformation. As we said in the introduction, reinsurance is an industry of expertise. This doesn't mean that massive productivity gains can't be achieved, but it does make the promise of Robotic Process Automation (RPA) operators to solve all problems by multiplying automation bots unrealistic. Today, expertise is lost along the way, with days spent reconstructing history and reconciling data. There is an urgent need to capture this expertise by simplifying and centralizing collaboration into a single collaborative workspace.

Today, only the implementation of an innovative and flexible solution, taking into account these issues, can contribute to optimize the reinsurance processes. This is precisely what Trace, the tool developed by Stratumn, offers.

Trace, the solution to modernize your reinsurance processes

A true lever for digitizing processes, the Trace SaaS platform has been designed as a collaborative and trusted space where reinsurance players can securely exchange financial information while retaining great flexibility in terms of the data flows and formats exchanged.

Users of the solution have a complete (and accurate) view of each step of a process, but also of the time required between each of these steps and of any blocking points to be optimized. Traceability of validations and exchanges allows potential discrepancies to be explained when accounts are issued, without waiting until the end of the period. In this way, Trace makes interactions more fluid while providing maximum security. This solution puts the end-to-end process under control. The solution improves payment times by removing blockages faster, and helps reduce processing costs.

By modernizing their reinsurance processes, industry players have the opportunity to streamline and optimize their services in new ways, thanks to the contribution of technology. When properly chosen, technology becomes a springboard to a whole new level of performance. Of course, no one is forcing you to follow this path. But keep in mind that the traditional approach will never be able to keep pace with the growing sophistication of reinsurance, and will result in ever higher operational costs.

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