Click source: John Fohr

It’s impossible to ignore the profound ways in which technological innovation has permeated nearly every facet of our economy, especially as the pandemic forced businesses across every sector to adopt new tech as a means to stay operational. And yet there are vital aspects of business that have virtually stagnated despite the high-tech breakthroughs all around them. In insurance, it’s easy to spot: the process for managing risk transfer still relies on technology better suited for the 20th Century.

It’s time for an upgrade.

Every person involved in risk management, from brokers to carriers to in-house risk managers and insureds, is functioning in an environment that suggests the last two decades never happened. Their best technological options for managing insurance documents include spreadsheets, PDF files, and email–or worse, a fax machine. Outside of those blasts from the past, the process is entirely manual: tasks like reviewing and verifying insurance, licenses, and compliance documents are largely performed by hand and stored haphazardly in either paper or electronic form. Obviously, this is time-consuming; it takes an average of nine minutes to review one certificate of insurance, for instance, adding up to thousands of minutes each year in document review. And moving quickly increases the likelihood of mistakes and missing red flags of fraud and abuse.

These inefficiencies reverberate up and down the risk management chain. Brokerages rely on accurate review to make sure they have a precise understanding of underlying risk opportunities for their insureds. Requesters like general contractors, building managers, and restaurant operators must carefully review documents of any third parties before they can work with them. And insureds must be ready to produce a bevy of valid documents as soon as possible. Any issues with the delivery of these static insurance documents or problems with the information they contain delays contractors, managers, and business owners’ ability to begin work. Preventable delays like this can have serious financial implications for all parties.

Further, the paper-based technology of insurance leaves every party susceptible to abuse and fraud. Insurance documents are shared and verified at the beginning of a business relationship. After initial review and beginning work, one of the parties could cancel their coverage and other parties involved would have no way of knowing unless they decided to manually review that party’s coverage at a later date. Should anything go wrong, other parties are suddenly responsible for financial risks for which they have not planned. The consequences of this can be catastrophic.

The continued inefficiencies impact more than just the insurance industry. Nearly every business is required to have insurance, and every day some 200,000 proof of coverage requests are made in the U.S.

A 21st-century digital solution needs to tackle each one of these problems, and the tech exists to do so. First, it must reduce the laborious process of reviewing insurance documents. There is an enormous opportunity for AI and robotic processing automation to streamline the review process and automate the most rote–but important–clerical parts of a risk manager’s job. Automating document review reduces opportunities for human error and fraud. Second, a digital solution should better connect all parties in the risk transfer process and reorient the process from a chain to a triangle, allowing all parties to seamlessly share documents with all other parties. By centralizing the sharing of insurance documents, it reduces costly delays and the need for extended back and forth.

The insurance industry has certainly benefited from modern technology, from providing customers with easier interfaces to manage and change their coverage to algorithmic tools that improve pricing models. But the fundamentals of exchanging insurance information have not changed. For the health of the industry and the overall economy, it’s high time they did.