By Tom Murray, Head of Product Strategy for LifePlus Solutions at Majesco.
Yet the benefits of a digital first approach extend far beyond dealing with the consumer. For the life and pensions provider, the day to day operations also hugely benefit from the high degree of automation that going digital brings; in particular, it makes the data accrued during all processes far easier to analyse, categorise and report on.
This is particularly important when it comes to ensuring compliance with regulation. The life and pension sector is no different from any other financial services sector. It is getting hit by regulatory changes constantly and it is expected to conform. Deloitte calculated that globally, in 2017, there were over 200 regulatory revisions daily and that over US$320 billion in fines had been levied in the 10 years since 2008.
These are huge numbers and are forcing life and pension providers to spend more money and effort ensuring that they are fully compliant with the regulatory environments in which they are operating. Given the scale of the penalties, the ability to ensure compliance is becoming a key concern of boardrooms worldwide.
The range of regulation is very broad. It touches almost all areas of the business. But it is at the customer touchpoints that most issues can arise. As long as these are being handled by a combination of manual and digital processes, as most companies are doing at present, the risk of data being lost at the interface is significant and, consequently, the dangers of failing to manage the data and report on it accurately are much higher.
Just as traditional insurers are looking at the Insuretech for examples as to how to improve their customer interactions, so they should look towards the rapidly growing RegTech area to see how the burden of compliance could be reduced and the risks of fines from the regulator or of being sued by consumers could be mitigated. A digital first approach will dramatically increase the volume of business completed digitally, ensuring that all data is available for analysis and reporting purposes far more easily than in the current hybrid processes.
Take, for example, the current anti-money laundering (AML) processes extant in most financial services providers. These processes tend to be a combination of digitally captured questions on the company’s systems accompanied by copies of key identification documents which are neatly filed away. How much easier it is to manage the process if the documents can be photographed by the individual and uploaded easily from a smartphone of tablet. In one fell swoop, the company has done away with the paperwork and the need for filing it and allowed the customer to do the work. It also means that the digital record can be preserved and makes monitoring the presence of such proof of identity far easier.
Similarly, the integration of AI and machine learning can ease the process of monitoring details about the types of business being done and the transactions that are being carried out, ensuring that fraud detection rates can be improved and transactions monitored for signs of fraudulent patterns, to improve overall security for all consumers.
It can be objected that digital interactions centralise customer data in one place, risking a major breach, but it has to be remembered that it is the duty of all companies to protect personal data, whether in physical or digital form. Centralising it allows it to be protected far more effectively and cheaply than spread across a number of systems or when it is held manually.
Regulatory reporting is becoming more important and more onerous and having all consumer data in digital form makes it far easier to aggregate it into whatever levels are being required by different regulators. Indeed, some traditional firms are partnering with RegTech firms in order to reduce their compliance burden whilst ensuring a high level of security and to maintain a reputation for being trustworthy with their consumer data.
As I have written before, a digital by default approach is very important strategically for life providers looking to be winners, as the millennials and GenZ (the always-on generations) move centre stage. But the benefits in a financial world of increasingly sophisticated regulation extend beyond satisfying customer need. A digital first approach enables providers to manage their corporate risks more effectively and at a lower cost than any other approach. That should mean that compliance departments join marketing and IT as enthusiastic cheerleaders for change to a digital approach.
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