Legal Operations Automation in the Financial Services And Insurance Industries

The insurance industry and other industries in the financial sector are closely related to the legal sphere. Legal documents ensure the execution of all financial services and their place within the legal sphere. The faster a financial company grows, the more monotonous daily legal operations become. More and more employees and resources are involved in these processes. Thus, in turn, reducing the company’s efficiency and profits.

The challenge of optimizing legal processes in the field of finance and insurance was accepted by the technology industry. This led to the emergence of FinTech and InsurTech. The market for IT-solutions in insurance has already matured enough, and further, with increasing competition in the industry, the demand for such solutions will grow. There are a number of positive factors that facilitate this. First of all, this is the growth of the insurance companies, the volume, and type of activities, and, accordingly, their solvency. This is obvious because the demand for insurance services will continue to increase according to the increase in people’s well-being, the strengthening of overall economic stability, and the change in the structure of consumer preferences in favor of more expensive goods. The range of services offered to both individuals and organizations will also expand.

At the same time, the needs of insurance companies in automation can be conditionally classified into several categories. First of all, as the business develops, any market player could face the need to install a specialized integrated system that would cover most of the routine operational processes. For example, it would allow to calculate key contract parameters, keep records and accumulate data on issued policies and concluded contracts, work with industry databases, and synchronize with accounting software and CRM systems. Over time, companies begin to require complex automation of insurance activities at all stages, which cannot be performed through loosely coupled patchwork solutions.

Some prospects of financial institutions

According to the forecast of the consulting company Accenture by 2022, the use of artificial intelligence will allow banks to increase revenue by more than 30%. In such conditions, experts in the field of fintech will be in demand. In turn, professions that require work on a template algorithm will disappear. For example, paralegals and underwriters, whose activities, according to Accenture, can be automated by more than 95%.

There is another danger for insurance companies. In the near future, there is a high probability of imposing competition from such giants as Facebook, Google, and Amazon. These companies have huge user personal databases and they can offer personalized insurance products. According to the GlobalData study, 18% of consumers would buy their car insurance or insurance for home from Amazon. This threat, among others, forces insurers to constantly raise the bar of their service quality and efficiency in order to ensure success in the future.

Automation benefits for both sides

• For an employee of the insurance industry, one of the main advantages of automation is that it allows you to reduce participation in the procedure of drawing up contracts, accepting applications, processing them, and communicating with partners and clients. Legal operations automation exist to remove distractions that prevent in-house lawyers from focusing on law. Some of the tasks previously performed by insurance company employees are now taking on IT solutions: from relatively simple chatbots to artificial intelligence systems.
  For instance, Hollard, which is a leading insurance company in South Africa, has integrated a legal operations automation system in 2017. The goals were as follows: optimize the processing of incoming messages, reduce the number of mistakes during the drafting of contracts, increase overall work efficiency and benefit by savings from automation. Hollard reported that after a year of using the system, aims were achieved and efficiencies have improved with automated processes being managed autonomously for approximately 98% of the cases and allowed to reduce mean time to execute work with 600%.
• For a client, automation is the interaction with an insurance company without having to visit an office or call a call center. For remote maintenance of insurance, there are special mobile applications. Through them are working services of remote maintenance — the possibility to upload photos from the scene of an accident, to get professional advice in the chat, to apply an application, etc. Customers really appreciate such an approach. Companies with automated processes have improved customer satisfaction by more than 60%.

And what are the trends?

Insurance companies are actively using social networks and instant messengers and developing chatbots for them. Accepting payments, calculating interest rates, and selling insurance policies directly in the messengers — chatbots can do that. In their arsenal, there are mainly scripted answers, but they can also be used in artificial intelligence technologies. In particular, in order to “understand” the questions and claims from the client, they must be formulated by him in a natural language.

Another promising technology for integration into the financial sector is the blockchain. Thanks to blockchain, it’s possible to create a single registry with data on policyholders. It is accessed simultaneously by insurers, reinsurers, and underwriters. Due to the unified access to information and its immutability, companies spend less time and effort on processing and authentication of data.

The insurance market is only looking at all the possibilities of the blockchain, so startups with their flexibility and willingness to use promising technologies have a chance to grab a large piece of this pie. InsurTech has enough representatives for this. In 2018, the analytical company CB Insights published the second annual study of Fintech 250 — the ranking of the most powerful and successful fintech startups. The list presented 19 categories, each of which has its own leader.

Large investors understand the prospects of the companies which are working at the intersection of insurance and technology. In 2018 InsureTech-startups raised more than $2,5 bln of venture investments, which set new historical maximum for this industry.

In today’s reality, in order to have a high level of competitiveness, financial industry players should incorporate into their work not only widely used programs but also the latest IT solutions for automating algorithmic legal and financial operations. This becomes possible thanks to the increase in the use of the Internet around the world, the evolution of web services, apps, etc. Technological optimization of work processes allows the company to make a qualitative shift to the advanced opportunities of the 21st century and discover new perspectives for itself.