Regulatory compliance is the hot topic in insurance right now. The Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was delivered in February this year, and the Life Insurer Conduct and Culture Report was published by the Financial Markets Authority and the Reserve Bank of New Zealand in January this year.
Although the Australian decision is much broader and doesn’t directly apply to New Zealand, the New Zealand Government has indicated that it will look at its recommendations closely and consider whether they should be implemented here (Minter Ellison).
In terms of the New Zealand investigation into life insurance, the Ministers of Finance, Commerce and Consumer Affairs have announced that a consultation paper on proposed legislative changes addressing regulatory gaps would be released by May, with legislation to be introduced later in 2019 (Minter Ellison).
The recommendations are important not just for life insurers. As the Report states, all insurance sectors need to be aware of the recommendations:
“While we prioritised life insurers for review, all insurance sectors should be actively considering conduct risk within their business. Given the similarities between life and non-life insurance, it is possible that the vulnerabilities identified in this report may exist across the broader insurance industry. We expect all insurers to assess their conduct and culture governance frameworks, and consider and act on all relevant recommendations in this report." (Life Insurer Conduct and Culture Report, 2019, FMA/RBNZ)
While this may be a premonition of more obligations to come in the future, technology can play a huge role in assisting brokers and insurers with compliance. According to Accenture, this goes much further than just automating manual reporting:
“Leveraging technology innovation in compliance does not simply mean to rethink current IT and application architectures trying to reduce at the utmost manual intensive reporting and data flows. It embraces also to capture recent trends that are affecting the ecosystem, with main regard to robotics that allows cost reduction while keeping strict controls and cognitive computing to analyze and suggest effective actions to the control owners.”
Let’s look at some of the findings from the New Zealand decision and consider how an AI-powered digital insurance assistant or broker could help ensure compliance.
Finding 1 - Changing needs
"Insurers need to proactively and regularly communicate with their customers and encourage customers to consider whether their needs have changed and whether the product remains suitable for them."1
Artificial intelligence in the form of a text or voice assistant or even a digital human can automate follow ups with customers. What would otherwise be a time intensive, error-prone and non-value add task for brokers and insurers, is then automated by the digital assistant. If a customer’s life circumstances or preferences change, they can either update their policy through the assistant, or alternatively the broker or insurer can be notified to arrange a meeting with that customer. The digital assistant becomes a member of the team servicing clients and enhancing their experience.
Finding 2 - Complaints
"Insurers need to have an accessible, confidential and independent whistleblower process."
"Insurers need appropriate and sufficiently resourced systems and processes to record and resolve customer complaints and incidents and to proactively identify and resolve issues."1
A digital assistant can automate part of the complaints and recording process. Complaints can be lodged through a digital insurance assistant where a record is automatically kept. The appropriate person or body can then be notified and the remediation process initiated from there.
Finding 3 - Monitoring and review of advice
"Risk management processes need to be appropriate and incorporate all material risks, including the monitoring and management of conduct risk, and the review of advice provided at point of sale and over time."1
Because digital broker advice is scripted in advance and validated by all stakeholders, it can’t stray from the agreed process. But perhaps even more valuable, is the automatic storing of all conversation content and data so that monitoring and reviewing advice or transactions made via the assistant is easy.
Finding 4 - Training / policies
"Training on products, sales, and advice was generally under-resourced and under-prioritised. In particular, training for intermediaries was inadequate and there was little evidence of training on conduct expectations."
"Insurers must have a relevant code of conduct, educate staff on good conduct, and have clear policies, processes and training for identifying and dealing with vulnerable customers."1
A portion of training required for human intermediaries could be removed by automating certain product sales and advice through a digital broker. The digital broker is only trained once and updated when necessary, never forgets and never strays from the script. This frees up humans to spend more time on training for more complex products.
Although I’ve only touched briefly on some of the recommendations and capabilities of an artificially intelligent assistant, it seems likely that insurers and intermediaries will soon be facing larger burdens to comply with training, advice, recording and complaints procedures. By adopting technology that will not just fulfil certain compliance obligations but keep an automatic record, insurers can ease the burden of compliance.