Sure, insurtech sounds great – who doesn’t want to modernize labor-intensive and time-consuming insurance processes, from underwriting and distribution to claims and customer service? But the truth is, this naturally risk -averse industry will adopt changes only cautiously and strategically, and very few new technologies have been road-tested enough to demonstrate lasting impact.
And of course, regulators will have a significant say on what is permissible.
But while the trend unfolds, automation has been proven to cut inefficiencies and streamline workflows. The industry’s administrative functions are undeniably laden with overhead costs associated with paper-based processes that demand copious time, labor and materials.
Why not pick one essential process – reconciliation – where automation can make a significant impact on the bottom line and reduce the risk of compliance misses and mistakes.
“In the insurance industry, every fraction of a cent that can be saved in time, resources, processing and operations goes directly to the bottom line,” said Renata Sheyner, senior product manager of Frontier™ Reconciliation, the end-to-end reconciliation and certification solution offered by Fiserv.
“Additionally, the more data that insurers add to their business and analyze through relatively untested insurtech innovations, the greater the need for automated, reliable transaction-level operational and balance sheet reconciliation.”
Most companies currently reconcile their books with two tools — a highlighter and a spreadsheet.
“I have seen conference rooms filled with filing cabinets to be sorted through,” Sheyner said. “Sometimes I ask potential clients, ‘How many different colored highlighters are in your desk drawer?’ Because that’s how it’s done without automation – highlighting items on printed reports, or using Excel spreadsheets to keep track of everything.”
Without automation, reconciliation at the transaction level can be a time- and labor-intensive process that leaves more room for human error. And errors increase the risk of running afoul of regulations. Reducing the risk of error in the books can save companies thousands in non-compliance fines when it’s time for an audit.
“A lot of CFOs are now personally liable for misrepresentation of financial statements. There are some pretty significant implications of non-compliance and not having your books complete,” Sheyner said. “There’s a huge benefit in incorporating all of your documentation into a system with built-in internal and external audit controls.”
In an intensely regulated industry, the importance of accuracy and transparency can’t be overstated.
Integration of data and matching transactions using an automated solution can cut the risk of error by as much as 50 percent, while allowing a more holistic and transparent view into the financial close process. An automated system with built-in audit controls can also ensure that standards dictated by Dodd-Frank and Sarbanes-Oxley Act are met.
A centralized view of transactions and the overall reconciliation lifecycle also makes it easier to mitigate the risks of fraud and write-offs related to unexplained exceptions. End-to-end reconciliation automation, combined with data agnosticism, identifies and resolves more exceptions. This can lead to an overall 75 percent reduction in write-offs.
“Insurers need a data-agnostic tool that can pull in massive amounts of disparate data around claims, policyholder details, equity fund balances, payment and disbursement statuses and more, and funnel it through an automated matching system to pair the right data with the right transaction,” Sheyner said.
Frontier Reconciliation provides that very detailed transaction matching, and can match data fields on a one-to-one, one-to-many, or many-to-many basis. Transaction-level matching with multiple fields reduces the need for manual intervention, “which allows employees to spend their time on value-added tasks like managing or investigating exceptions,” Sheyner said.
Among Frontier Reconciliation users, reducing manual tasks and implementing automated reconciliation can experience a 60 – 80 percent gain in efficiency.
The cost savings are also hard to ignore. On average, financial companies using an automated reconciliation solution save 25 percent on audits by providing electronic access to accounts and required approvals.
Taking paper out of the equation also saves the costs of buying paper and printing materials, reduces the manpower and hours needed to process records, and can speed up financial close by two to four days, on average.
“We frequently help accounting and finance teams build a strong internal business case for automated reconciliation and certification to present to senior management,” Sheyner said.
In addition to mitigating risks from non-compliance, fraud, and write-offs, an automated reconciliation process can also head off reputation risk.
“The reputational risk from restatement may not be monetary initially, but over time can certainly hurt an organization pretty severely within the market among their policyholders, peers and regulators,” Sheyner said.
Several large multi-line insurers in the U.S. rely on Frontier Reconciliation, including a top 10 multi-line carrier with over $43 billion in direct premiums written (DPW) who has trusted Frontier Reconciliation for the past 10 years.
“When they implemented Frontier Reconciliation a decade ago, they had a team of 40 people working on 300 reconciliations a day using Excel worksheets. Since automating the process, they’ve been able to refocus the team to eight who now manage more than 3,000 reconciliations a day,” Sheyner said. “And those other employees have been able to focus on other valuable strategic projects – ones they were hired to manage.”
Frontier Reconciliation also helps this leading Fortune 100 carrier match policyholders with premium payment data —like what type of payment was received, who received it and in what form (check, ACH, direct debit) — and track other information like claims data, coverage and payout limits, and outstanding disbursements.
“They can see in real time exactly how many outstanding payments there are and how many disbursements have been made. They can check on aging claims, which is important because the longer the claim sits open, typically the more expensive it gets,” Sheyner said. “If something is outstanding for 30 days, they can ensure processes are in place to bring those files to a close.”
Stronger compliance, reduced costs, and potentially faster claims closing … these are the insurtech promises that an automated reconciliation solution can bring to the industry today.
To learn more, visit: Frontier Reconciliation for Insurers.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Fiserv. The editorial staff of Risk & Insurance had no role in its preparation.
R&I: What was your first job?
Bus boy at a fine dining restaurant.
R&I: How did you come to work in this industry?
I sent a résumé to Harrah’s Entertainment on a whim. It took over 30 hours of interviewing to get that job, but it was well worth it.
R&I: If the world has a modern hero, who is it and why?
The Chinese citizen (never positively identified) who stood in front of a column of tanks in Tiananmen Square on June 5, 1989. That kind of courage is undeniable, and that image is unforgettable. I hope we can all be that passionate about something at least once in our lives.
R&I: What emerging commercial risk most concerns you?
Cyber risk, but more narrowly, cyber-extortion. I think state sponsored bad actors are getting more and more sophisticated, and the risk is that they find a way to control entire systems.
R&I: What is the riskiest activity you ever engaged in?
Training and breaking horses. When I was in high school, I worked on a lot of farms. I did everything from building fences to putting up hay. It was during this time that I found I had a knack for horses. They would tolerate me getting real close, so it was natural I started working more and more with them.
Eventually, I was putting a saddle on a few and before I knew it I was in that saddle riding a horse that had never been ridden before.
I admit I had some nervous moments, but I was never thrown off. It taught me that developing genuine trust early is very important and is needed by all involved. Nothing of any real value happens without it.
R&I: What about this work do you find the most fulfilling or rewarding?
Setting very aggressive goals and then meeting and exceeding those goals with a team. Sharing team victories is the ultimate reward.
R&I: What is the most unusual/interesting place you have ever visited?
Disney World. The sheer size of the place is awe inspiring. And everything works like a finely tuned clock.
There is a reason that hospitality companies send their people there to be trained on guest service. Disney World does it better than anyone else.
As a hospitality executive, I always learn something new whenever I am there.
The risks that Disney World faces are very similar to mine — on a much larger scale. They are complex and across the board. From liability for the millions of people they host as their guests each year, to the physical location of the park, to their vendor partnerships; their approach to risk management has been and continues to be innovative and a model that I learn from and I think there are lessons there for everybody.
R&I: What is the risk management community doing right?
We are doing a much better job of getting involved in a meaningful way in our daily operations and demonstrating genuine value to our organizations.
R&I: What could the risk management community be doing a better job of?
Educating and promoting the career with young people.
R&I: What have you accomplished that you are proudest of?
Being able to tell the Pinnacle story. It’s a great one and it wasn’t being told. I believe that the insurance markets now understand who we are and what we stand for.
R&I: Who is your mentor and why?
John Matthews, who is now retired, formerly with Aon and Caesar’s Palace. John is an exceptional leader who demonstrated the value of putting a top-shelf team together and then letting them do their best work. I model my management style after him.
R&I: What is your favorite book or movie?
I read mostly biographies and autobiographies. I like to read how successful people became successful by overcoming their own obstacles. Jay Leno, Jack Welch, Bill Harrah, etc. I also enjoyed the book and movie “Money Ball.”
R&I: What is your favorite drink?
Ice water when it’s hot, coffee when it’s cold, and an adult beverage when it’s called for.
R&I: What does your family think you do?
In my family, I’m the “Safety Geek.”
R&I: What’s your favorite restaurant?
Vegas is a world-class restaurant town. No matter what you are hungry for, you can find it here. I have a few favorites that are my “go-to’s,” depending on the mood and who I am with.
If you’re in town, you should try to have at least one meal off the strip. For that, I would suggest you get reservations (you’ll need them) at Herbs and Rye. It’s a great little restaurant that is always lively. The food is tremendous, and the service is always on point. They make hand-crafted cocktails that are amazing.
My favorite Mexican restaurant is Lindo Michoacan. There are three in town, and I prefer the one in Henderson as it has the best view of the valley. For seafood, you can never go wrong with Joe’s in Caesar’s Palace.