By Badis Matallah, Founder and CEO of Qualitadd.
If delegating the management of contractual elements to external service providers has clearly become part of the customs of insurance organizations that want to focus on their core business again, this approach nevertheless entails a certain number of regulatory restrictions, which have been reinforced with the directive European ” Solvency 2″ enters into force on 1eh January 2016. In addition to the minimum capital that delegating insurers must demonstrate, they are fully responsible for compliance with the obligations incumbent upon them when they outsource. They must therefore ensure the efficiency of the service providers and compliance with their obligations. But how do you best handle these new demands and create added value? One answer appears quite naturally: to be supported by a dedicated solution that will mix technology and people.
The follow-up of delegates: a strategic mise en abyme
In the field of insurance, the delegation of management consists in entrusting all or part of the actions leading to the execution of an insurance contract to another organization. He will carry out his tasks independently using his own human, material and financial resources and must meet the needs of the company’s customers. In terms of its scope, it is easy to understand that this position has now become a significant risk center, especially since it has intensified in recent years. The delegated activities are varied and strategic — association of policyholders, members or members, calls and administrative management of contributions, telephone reception and CRM-like customer relations, etc. — and the actors also have a real role to play in the story.
Regardless of whether they are brokers or service providers without intermediation activity, they are generally selected for their ability to offer innovative services and to enrich the offers intended for end customers. For order issuers, the challenges are therefore several: compliance, commercial pressure and customer knowledge. And despite the many associated benefits (reduction in costs and bureaucracy, policyholder retention, better governance and risk assessment), the loss of customer-insurer connection remains, as does business acumen. Also, so that the insurance organization does not become dependent on market service providers and does not find itself in a deviant situation that could harm it, monitoring of delegates is essential.
Innovation at the service of third-party assessment
Regarding the legislative and legal basis, evaluation by third parties is not an option: the risk bearer must absolutely be able to audit his delegate. As such, several means are available: traditional processes (via questionnaires for example), on-site checks and, to a lesser extent, the mystery shopper method. However, with increasing outsourcing, it can be a real challenge for insurers to complete these checks each year. In addition, a certain number of elements must be taken into account in connection with an audit of the management delegation process: integration of delegated activities into the internal audit plan, the effectiveness of the management delegation control system, control environment and information quality a? the risk department. Unless the service provider has ISAE 3402 (International Standard on Assurance Engagements No. 3402). Control and audit of delegates can therefore be time-consuming and very expensive, but appears above all as a decisive action in relation to compliance, compliance with contractual obligations and/or monitoring of commercial results between stakeholders.
How, then, to meet the obligations with an increasing number of requests and a relatively complex evaluation process? Trust that a digital solution, built together by tech players and insurance companies, is as functional and sustainable as possible, covering all needs, enabling the industrialization of the audit process and offering a mapping of subcontractors.
However, to be sure to succeed in qualifying useful data within the framework of the “Solvency 2” Act, people remain an essential component to ensure that all delegates respond to their assessment within the time allowed. For the success to be complete and in line with the new applications, the customer-insurance company must also be able to follow the general progress via a single interface. He will also be able to receive messages issued by the team dedicated to reminders and support for delegates.
The evaluation of third parties falls within the scope of the management of delegated activities, which falls within the scope of the risk, control and internal audit department. That is why it must now be dealt with in its own right using a service specifically designed to respond in particular to compliance issues related to the “Solvency 2” law. But also to improve the end customer’s experience, where the goal is to strengthen the ties that unite him to his insurance organization.