According to a new study by the data management companyAutoRek, the failure to modernize key back-office operations and the introduction of new technologies is stumblingthe insurance."I think that's a common way of thinking, not only in insurance, but in more traditional businesses in general. But I think there are opportunities with automated solutions and cloud capabilities that continue to come to market," saysMark Baker, sales consultant inAutoRekspecializing in insurance.

A study found that 21% of US insurance companies have ineffective processes for collecting premiums and disbursing funds.More than half report that they still use old spreadsheets that require manual input.According toBaker, this causes version control problems, is difficult to audit, is not scalable, and is cumbersome.

Bakernotes that US insurance companies tend to favor front-office systems.They generate revenue when it comes to resources.This may be why many still choose to rely on outdated systems and processes."As a company grows, it starts to fail. At that point, it's time to realize that the foundation of your business rests on the back office. If you can automate that, it's just going to help the business grow further," he adds.

Back-office processes need to be modernized

AutoRek finds that among the challenges facing U.S. insurers, the biggest issues are multiple systems and data sources.Other problems are large transaction volumes and partial payments and adjustments.

"We found that insurers are dealing with huge amounts of different data coming from different systems. So everything is in a different format, there's a different column structure – different levels of data quality within all of that. So, as you can imagine, dealing with that on a day-to-day basis can be quite cumbersome," he emphasizesBaker.

This leaves companies vulnerable to "key man risk", as only the person who created the spreadsheet would understand these formulas.It also lacks auditing, if someone changes a formula or value in a spreadsheet, none of it can be traced.

Where does automation fit in??

Bakersuggests that modernized automated tools such as SaaS are a key solution.He explains that in a typical scenario, a back-office employee might download data, manually enter it into old spreadsheets, and check the quality of the data and formulas.It might be lunch time before that person has managed to enter the data, and then they still need to find time to do value-added activities.

"With an automated solution at a really high level, it leverages your resources, primarily your human resources, for more of these value-added activities," saysBaker."We've found that looking to automation and using digitization can lead to huge savings. This will allow customers to create a 'golden' method by which we can standardize data."

A modernized and automated SaaS that runs 24/7 can load data into a unified system and process it as soon as it becomes available.Additionally, every single action is auditable, whether system or user initiated.

"So if you go make a coffee and come back to your desk, by that point the data will have been entered into the system. It will have been validated, checked, matched and then available for all these investigations. It's doing more with less," he says.

Upgrade via vendors

AutoRekis an example of solutions available to insurers looking to modernize and automate their back-office processes.They offer a platform that scales according to the company's requirements as the business grows, he saidBaker.

Importantly, this transfers data management to a vendor who then becomes responsible for implementation, upgrades, maintenance.Overall, it "removes that headache for the customer, where traditionally this would all be done by an internal IT department."

"I think that's some of the benefits of SaaS, and also being able to keep up with the software and the latest technology, because it's all taken away from the customer and becomes a managed service," he explainedBaker.

He noted that while insurers may be hesitant to adopt new technologies or modernized solutions, a SaaS solution has advantages over more traditional options.

"Everyone's buzzword right now is talking about artificial intelligence and stuff like that. I think it's always about being open-minded and embracing new possibilities, and sometimes that's in the tech space," saysBaker.

AutoRekis a global data management company founded in 1994 and based in Glasgow, Scotland.Its software helps automate data reconciliation for UK and US financial institutions.

For the study cited in this article, AutoRek conducted online interviews with 250 U.S. insurance company executives in November 2024.

How failure to modernize is holding insurance companies back?

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