Over a series of 3 blogs, we explore what RegTech is, how it helps streamline operations and how it will continue to be a part of regulated industries.
Part 1: Origins
Businesses operating within regulated industries face continually evolving challenges. These challenges can take the form of regulatory and legal responsibilities or progressively competitive commercial tests. In the drive to remain competitive, businesses are increasingly turning to technology solutions for a range of operational areas and not just product distribution.
Generally, the terms that most people will be familiar with for these technology solutions are InsurTech (Insurance Technology) and FinTech (Financial Technology). More recently there has been an increasing focus on a relative newcomer; RegTech or Regulatory Technology. Simply put, all these acronyms refer to the concept of using software and technology to deliver seismic efficiency gains in a business processes or areas of operation.
REG’s Managing Director (Paul Tasker) and Chief Commercial Officer (Jonathan Rusby) shared their views on FinTech, InsurTech and RegTech.
They agreed that ‘simply expressed, the concept of adding 'tech' onto a word refers to the technological advances in hardware or software employed in the processes inherent to the specific areas of operation to create efficiencies and cost savings.
FinTech effectively refers to this within financial services, which insurance is a sub-set of, as is banking. InsurTech tends to refer to software or hardware enhancement in the delivery of a customer experience in insurance. For example, the process of selling insurance has been vastly updated and streamlined through technology. When people are talking about InsurTech, they're often focusing on either policy sales, or fulfilment systems, or policy admin systems.'
RegTech is all about regulated activities. When discussing RegTech we are talking about compliance generally. RegTech facilitates the achievement of regulatory compliance that has been present in the UK GI industry since approx. 2005 and prior to that within the life insurance segment.
The requirements that RegTech streamline have always existed. The requirements have evolved, and the responsibilities of regulated businesses which are governed by the Financial Services Markets Act have changed. However, the notion of being compliant, which is meeting those regulatory responsibilities, many of which are statutory responsibilities remains. To meet these obligations, all firms have to varying degrees adopted processes to achieve regulatory compliance. Technology has enabled those processes to become much more efficient, affordable, streamlined and effective.
Last year Deloitte, calculated there are around 200 regulatory revisions made globally every day, with regulators handing out fines in excess of $300bn between 2008 and 2017. RegTech is increasingly becoming the ‘must have’ solution for ensuring continued compliance within a manageable cost base.
The increasing regulatory and compliance obligations being placed on firms has had a direct impact on the rise in RegTech’s uptake within regulatory and compliance processes in Insurance.
In 'Part 2: The rise' we are exploring how RegTech can drive operational efficiencies in supporting this challenge.