Modernizing reinsurance administration

Reinsurance automation technology

​Why is reinsurance—a vital, strategic practice—hampered by manual processes, outdated technology, and insufficient analytics capabilities? This report assesses findings of Deloitte Advisory's survey, exploring the top "pain points" of industry executives and how upgrading reinsurance technology is necessary to increase profitability, enhance analytics, strengthen controls, and reduce under-billing.

Key findings and observations

Reinsurance is one of the most significant financial transactions for an insurer/reinsurer, involving hundreds of billions of dollars annually and a critical strategic element in managing earnings volatility and capital adequacy.

Yet despite this significance, respondents to Deloitte Advisory's reinsurance administration survey indicated there has been minimal investment over the last decade in the technology, processes, data quality, and analytics in this area.

In our new report, Modernizing Reinsurance Administration, we discuss the principal findings of our survey, which consider the objectives of reinsurance, relationships with reinsurers, organizational capabilities, technology applications used, top “pain points,” and emerging opportunities.

Increasing complexity

While 62 percent of executives say their firms continue to use reinsurance with the objective of risk transfer, 54 percent also cited capacity expansion (i.e., capital management), and another 38 percent cited reducing income variability as key purposes.

To accomplish these goals, underwriters have taken to individually negotiated contracts and the application of complex risk profiles. Reflecting this, 92 percent said their company's reinsurance contracts have medium or high levels of complexity.

Compounding the complexity issue is that reinsurance administration at many insurers has not kept pace with the increasing sophistication of today's contracts.

Enhancing data integration and quality

Reinsurance administration requires companies to integrate data from multiple sources, products, lines of business, and systems. Respondents gave their companies low ratings for timely and informative data, and they most often cited data quality (69 percent) as a top pain point.

High-quality data are recommended to understand profitability, determine the optimal deployment of reinsurance, and price contracts appropriately. Despite the data's importance, access remains a challenge at most insurance companies.

Respondents most often cited data quality (69 percent) as a top pain point.

Progressing toward analytics

Enhanced reporting, analytics, and dashboarding capabilities were among the top-reported areas where respondents wished to make the greatest progress. Approximately 38 percent saw analytics as a top pain point.

Siloed functions and processes, along with the related technology, cause another barrier to advancing analytics at reinsurers. With proper implementation, enhanced reinsurance analytics can help organizations improve negotiations with reinsurers and provide the business insights to preserve and improve margins.

Underinvestment in technology

Executives said their companies had only basic capabilities in usable and sustainable reinsurance technology solutions and that major enhancements would be needed. In addition, half said their company continued to use spreadsheets, which can be labor intensive and prone to error.

Most companies indicated that significant upgrades would be required before their capabilities could be considered "leading" within the industry. Eighty-five percent of executives said their company is looking to improve or enhance its technology over the next one to three years, while 46 percent said they would be investing in predictive analytics.

46 percent of executives said they be would investing in predictive analytics.

Streamlining operations

Companies can improve the effectiveness of processes while reducing costs by enacting reinsurance automation. Yet, they rated themselves low on standardized and automated processes, which is a barrier to effective automation. Also, half reported using significant manual workarounds.

Moving toward automated systems can enable companies to refocus their resources and allow their professionals to spend less time gathering data and running reports and more time on analyzing data and drawing deeper, more meaningful business insights and performance analytics.