Insurers have room to grow in the reinsurance-processing department, according to a survey conducted on behalf of Inpoint Services, an Aon company. Though reinsurance recoverables are among their largest assets, most insurers lack a dedicated staff to administer those claims, and two out of three insurers are using outdated technology to administer their reinsurance. The survey of 138 insurers revealed that 32% of insurance companies use comprehensive technology systems to support their reinsurance processing, up from just 17% in 2005. However, 42% of insurers still use partially automated systems and 26% rely on manual processes, such as spreadsheets.
“Considering that reinsurance recoverables are among most insurers’ largest assets, the number of companies relying on partially automated or even manual systems is surprising,” says Mark Richtmyer, senior account executive at Inpoint Services. “Fortunately, the survey found that the use of fully automated technology is growing. That said, companies contemplating new technology should give special consideration to how they will integrate their new systems with the processes and human resources currently in place.”
The survey found that one-fifth of responding companies have used the same partial or comprehensive reinsurance administration technology for more than 15 years. Only 27% of companies said their systems were less than five years old. Reasons cited for the reluctance to update include budgetary constraints and lengthy implementation periods. Many firms claim their existing systems meet their current reinsurance processing needs.
The survey also demonstrated a direct correlation between company size and technology use. Only 23% of smaller firms (less than $100 million in ceded premium) have fully automated systems, while 57% of large companies (more than $500 million in ceded premium) have fully automated systems. Even among companies that are highly automated, size dictates the type of systems used. Small companies tend toward off-the-shelf software, while larger firms tend to develop their reinsurance administration technology in house.
Electronic document storage, in the opinion of those surveyed, increased efficiency by at least a two-to-one margin. Sixty-two percent of respondents said they electronically stored all of their contracts, 49% electronically stored all of their claims and 44% stored all of their reports this way. The wider usage of electronic storage for contracts is likely due to the static nature of the documents and the need for access by multiple users.
Technology isn’t the only thing lacking. Even at companies with highly advanced systems, respondents report the need for a high level of human involvement. Only 44% of companies have a dedicated reinsurance department. Most insurers distribute responsibility for reinsurance administration across several departments. Among those surveyed without a dedicated reinsurance department, underwriting is the department that has the most people performing some level of reinsurance administration when all companies. Accounting and claims are next on the list, followed by management and IT.
“The decision to centralize reinsurance functions depends on a host of factors, including availability of staff, the processes used, technology and complexity of the reinsurance program itself,” says Tim Corley, senior solutions specialist at Inpoint Services. “Insurers need to determine the point at which centralizing the reinsurance function makes sense.”
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