In part 1 of our blog series on how RegTech can help to revolutionise regulation and compliance processes, we touched on the origins of RegTech.
Part 2: The Rise
In 'Part 2: The Rise', we look at how RegTech has steadily established itself as an effective solution for meeting the challenges posed by regulation and compliance, driving operational efficiencies and facilitating business transactions between counterparties.
In the insurance market, RegTech has become an integral tool for firms to undertake due diligence and oversight of their trading counterparties and supports firms in building a robust governance and control framework.
It should be noted that technology has always been used where it's available to meet these demands. However, the technology that has traditionally been used was not designed for the purposes it's being used for. Spreadsheets, for example, which for over 25 years have been the go-to product for firms to capture data, create registers and manage processes.
However, ultimately such tools were never designed to fulfil all these functions. Spreadsheets are quite an adaptable piece of software, offering those with the required skillset the ability to configure them to meet most of a firms’ needs. The fact remains, that fundamentally they were not designed specifically for how they are being used today. There are inherent limitations which mean such tools are susceptible to human errors, they are not particularly well designed for collaborative work, have a distinct lack of version control, and scale poorly.
Under the RegTech umbrella, software has evolved that is fit for purpose, designed specifically to support firms in meeting their regulatory obligations, harnessing essential components missing from spreadsheets such as automation, recording, reporting and real time information. If you take the example of what we do at REG, our RegTech solution amalgamates feeds of real time data that it imports from external sources, which tools such as spreadsheets just cannot. Spreadsheets are only a repository for what users put into them. This is one area where technology has evolved to meet a need. It has become increasingly easier to get systems and databases to talk to each other, for example through the use of APIs. Spreadsheets have become, for lack of a better word, redundant in terms of those applications.
Meanwhile, the regulatory obligations levied on firms continue to increase. Following hot on the heels of the Insurance Consumers Act, Insurance Act and Enterprise Act came the implementation of GDPR, the Insurance Distribution Directive and Senior Managers Certification Regime forcing many participants to ‘re-paper’ their contracts with trading partners.
RegTech solutions have also transformed the offer, acceptance and exchange of contract documentation. One of the main contributors to this has been the development of cloud technologies giving access to data and documents instantaneously, wherever you are in the world. Going back 10+ years, there was a need to have the files and documents installed on your desktop, laptop or company networks, which used to only be accessible internally.
With the increase in regulatory obligations, what does the future hold? How will increased regulatory obligations impact RegTech’s importance in Insurance?
In 'Part 3: The Future’ we explore the continued developments that we believe will drive RegTech’s uptake within regulatory and compliance processes in Insurance.