The Past 4 Years Have Exposed the Urgency of Modernising Reinsurance Platforms (2 of 5: Control)

Blog Series 2 of 5

Sapiens Article Series on Why the Past 4 Years Have Exposed the Urgency of Modernising Reinsurance Platforms: Process, Control, Manual Processing, Human Error, Lack of Visibility.

Control

In our opening Whitepaper for this series, ‘Business Case for Reinsurance Administration Automation’, we discussed the two major disruptive forces that have forever changed the reinsurance market: natural catastrophes and COVID-19. In 2021 alone catastrophic losses exceeded $100 billion and $450 billion in aggregate since 2017[1]. When it comes to the life insurance market, COVID-19 has increased life insurance purchases by 32%[2]. On the property and casualty front, the American P&C Insurance Association forecasts that COVID-19 claims will reach $1 trillion a month[3].

With such staggering numbers, the complexity of the overall system is overwhelming. Furthermore, as reinsurance programmes are becoming more and more sophisticated, so is the intricacy of each process. Managing these complex systems is still largely conducted manually. Each reinsurance event can span multiple products and regions. At such data volumes, a manual process is prone to human error. From data collection to data entry and calculation, each human error carries with it exponential consequences that ultimately have an impact on the bottom line either through overbilling or underbilling.

According to research conducted by Deloitte[4], executives believe that through modernising and automating their insurance and reinsurance platforms they might be able to achieve greater control and efficiency over:

• Financial statement preparations (31%)
• Documentation preparation (31%)
• Adjusting documentation (23%)

Another control challenge that stands at the forefront of reinsurance complexity is third-party data integration. With such complex processes, and as organisations attempt to increase efficiency, outsourcing parts of the reinsurance process has become increasingly common. Integrating this data back into the process is also challenging. According to McKinsey[5] most of the challenges lie in three areas:

• Lack of common standards – Risk management practices vary across organisations.
• Case by case evaluation – most reinsurers evaluate each case individually according to numerous systems, policies, and frameworks.
• Varying coverage – the third party’s scope and coverage may vary.

The above-mentioned difficulties reflect a fraction of the elements that challenge our control over reinsurance claims and policies. Modernising reinsurance platforms is inevitable, and it is likely that the lack of control over reinsurance will grow as processes become more complex. A modernised reinsurance platform will enable management and administration of all reinsurance types over a single platform, with automated calculations, processes and seamless third-party integration. It will provide a consolidated view across the whole process with a fully integrated workflow.

Such a platform will provide the framework to lift us out of the current manual labour and human error trenches to a more elevated position from which we can analyse the automated data we receive, and obtain insightful and actionable results that are accurate and efficient.

To see how you can modernise your reinsurance platform with Sapiens, click here.

[1] Climate change making peak peril distinctions irrelevant: Howden

[2] The COVID-19 Effect: High Tech With Human Touch to Optimize Life Insurance Customer Experience

[3] Forrester’s 2021 predictions: Claim leakage top carrier concern | PropertyCasualty360

[4] Deloitte: Modernizing Reinsurance Administration

[5] Improving third-party risk management in the (re)insurance and investment industries

• digitalization
• reinsurance