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.
One of my first jobs was actually at a local insurance agency when I was a high school student, before I had any idea I was going to get into insurance. After college, I was a claims analyst at Sunbeam.
R&I: How did you come to work in risk management?
I fell into it after college, where I studied international business. I had a stack of resumes, and Sunbeam came to Florida from Rhode Island, so I applied. I interviewed with the director of risk management and just stuck with it and worked my way up.
R&I: What is the risk management community doing right?
Getting a holistic view of risk. Risk managers are understanding how to get all stakeholders together, so we understand how each risk is aligned. In my view, that’s the only way to properly protect and serve our organizations.
R&I: What could the risk management community do better?
We’ve come a long way, but we still have to continue breaking down silos at organizations. You also have to make sure you really understand your business model and your story so you can communicate that effectively to your broker or carrier. Without full understanding of your business, you can’t assess your exposures.
R&I: What was the best location and year for the RIMS conference and why?
Being on the East Coast, I like Philadelphia.
R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?
Organizations understanding their cyber risk exposures and how this line of insurance can best protect them. Five to ten years ago, people shrugged it off as something just for technologies companies. But you can really see the trend ticking up as a must-have. It was always something that was needed, but people came to their own defining moments as we got more involved in electronic content and social media globally. Cyber risk is inherent in the way we do business today.
R&I: What emerging commercial risk most concerns you?
The advent of security and contractual obligations. These are concerns as we all play a part in this big web of a global economy. There’s that downstream effect — who’s going to be best insulated at the end of the day should something transpire, and did we set the right expectations?
R&I: Is the contingent commission controversy overblown?
I think so. At the end of the day, it’s all about the transparency you’re getting from the people you work with. I think some best practices in transparency came out of the situation, but we were working on a fee basis, so it wasn’t as much of an issue for us as it may have been for other companies.
R&I: Are you optimistic about the U.S. economy or pessimistic and why?
I’m cautiously optimistic. We seem to be stable in terms of growth, and I’m hoping that the efficiencies and the economies of scale we achieve through technology will benefit us. But I’m also worried about the impact that could have on the number of jobs globally.
R&I: Who is your mentor and why?
Robert O’Connor, my former director when I was first on-boarded at Sunbeam, gave me so many valuable tidbits. I’ll call him to this day if I have an idea I want to bounce off him. He’s a good source of comfort and guidance.
R&I: Of what accomplishment are you most proud?
I have two very empathetic, healthy and happy boys. Eleven and soon-to-be 14.
On the professional side, there were a lot of moments during my career at Citrix where we were running a very lean organization, so I had the opportunity to get involved in many different projects that I probably wouldn’t have had in other larger organizations.
R&I: What is your favorite book or movie?
My favorite movie is Raiders of the Lost Ark.
R&I: What’s the best restaurant you’ve ever eaten at?
A place in Santa Barbara called Bouchon.
R&I: What is the most unusual/interesting place you have ever visited?
Caverns in Gatlinburg, Tennessee. They were interesting. It was cool to see these stalagmites and stalactites that have been growing for millions of years, and then just above ground there are homes from the 1950s.
R&I: What is the riskiest activity in which you’ve ever engaged?
Riding on the back of my husband’s Harley.
R&I: What about this work do you find the most fulfilling or rewarding?
I like educating people and helping them find their ‘aha’ moment when you highlight areas of risk they may not have thought about. It allows people to broaden their horizons a little bit when we talk about risk and try to explore it from a different angle. I try not to be the person who always says “No” because it’s too risky, but find solutions that everyone is comfortable with given a risk profile.
R&I: What do your friends and family think you do?
I tell my kids I protect people and property and sometimes the things you can’t feel or touch.