Insurers are putting themselves at increased risk due to their current reinsurance management process and solutions, according to insurtech and intelligent solutions provider Duck Creek Technologies (Duck Creek).
With reinsurance being about minimising insurers' exposure to risk, Duck Creek revealed that insurers in Australia and New Zealand have been exposing themselves to increased risk because they still use risky, outdated, and manual methods to manage their reinsurance programs, including spreadsheets, outdated legacy systems, and manual processes and workarounds. These methods lead to higher reinsurance costs and could expose insurers to other significant consequences.
Julien Victor (pictured), managing director of reinsurance at Duck Creek, said having a strong reinsurance function helps insurers deliver better customer outcomes.
“Reinsurance, insurance for insurers, is a vital function, empowering insurers to offer more coverage to customers at a more competitive price,” he said. “At a time when every insight, innovation, influence, and advantage is needed to help insurers take ownership of their reinsurance program, the continued use of antiquated methods may be the biggest factor undermining their reinsurance capabilities. This can harm their business operations, risk position, bottom line, and of course, the end consumer.”
Duck Creek said that using outdated reinsurance systems and practices leaves insurers at a disadvantage when negotiating their reinsurance contracts because they:
“Costly major natural disasters – coupled with global inflation, supply chain constraints, and soaring energy prices – [and] factors out of the control of many insurers are pushing up reinsurance costs. Insurers shouldn't be contributing further to an already challenging environment by relying on antiquated reinsurance management methods,” Victor said.
Duck Creek further explained that using outdated systems might negatively impact insurers' agility, contribute to their inability to integrate their reinsurance operations into other solutions easily, and make them dependent on human manual input. Additionally, these systems can restrict data and insights available, impacting strategic decision-making and contract negotiation and increasing the pressure on employees because of their unreliability and lack of useability.
“We've worked with insurers who had identified that their current use of antiquated methods to manage their reinsurance contracts represented an unacceptable level of risk on multiple business fronts. This had inspired them to review their reinsurance management methods and implement a more modern and less risky reinsurance management solution,” Victor said. “In the current environment of rising costs and increasing business pressures, insurers should look to do everything in their power to help deliver their customers the best outcomes possible.”
