Munich Re backs Ascent regtech platform
The re/insurer will back Ascent’s automated regulatory compliance technology, protecting users against associated risk and exposure.
Ascent was founded in 2015 by CEO Brain Clark and serves global financial institutions and SMEs across the banking and securities sectors. Its flagship product RegulationAI uses artificial intelligence to assess changes in regulatory rules on a case-by-case basis, automating much of the manual process to ensure that firms remain updated and compliant in their obligations.
The tech solution saves customers hundreds of man hours, Ascent says, making it “easier and less expensive to do the right thing in following… regulatory requirements and managing regulatory change”.
RegulationAI aids institutions in pushing down costs, reducing regulatory risks and avoiding fines for non-compliance. Clark says the additional layer of assurance provided by Munich Re provides “further validation for that notion” and strengthens its position in the market.
"Munich Re evaluated Ascent’s groundbreaking approach to the use of AI and machine learning in analyzing regulations and understood that we were an ideal partner for mitigating and eliminating regulatory and compliance risk,” he added.
Another boon for regtech
The backing of a major re/insurer is a win not just for Ascent but for the regtech industry at large.
While many insurance firms have remain reticent in handing over responsibility for such a key function to algorithmic care, Greg Barats, a senior Munich Re executive and President and CEO of the group’s HSB company, said the partnership “further underscores our view of the maturation of AI as a tool to limit the probabilities of risk”.
"It enables Ascent to offer its RegulationAI with a performance protection that is unique to the market and gives them a competitive advantage."
The deal also further’s Munich Re’s stake in the relatively nascent AI insurance market, a potential future premium goldmine as industries accelerate their digital transformation and automate more of their core functions.
Lloyds Bank fined by FCA for misleading insurance customers
In many ways a continuation of the Financial Conduct Authority’s (FCA) quest to eliminate ‘price walking’ from insurance, Lloyds Banking Group has been heavily penalised for seemingly misinforming their customers.
Specifically, nine million home insurance policyholders were contacted and encouraged to renew for the chance of getting ‘competitive prices’. Furthermore, approximately 500,000 customers were promised ‘loyalty discounts’. According to the FCA, both claims were unfounded and false.
The £90mn fine leveled at Lloyds is the largest since Standard Chartered Bank was ordered to pay £102mn in 2019 for breaching money laundering regulations.
It remains purely speculative about how volitional this error in communication was. Nevertheless Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, stated the institution would not tolerate any situation with the capacity to harm customers.
“Firms must ensure their communications with customers are clear, fair and not misleading. [Lloyds] failed to ensure that this was the case.”
The bank had largely started to remove phrases like ‘competitive prices’ from its official communications since 2009. However, the FCA found that renewal forms still included such wordings as late as 2017.
Since the renewal prices offered were likely to be higher than those offered to new customers, or even if the policyholder switched provider, Lloyds was in fact deceiving the recipients of these communications.
Battling against insurance price walking
According to reports, 87% of customers offered the aforementioned ‘deals’ renewed. Although the FCA will not be ordering Lloyds to reimburse them, the bank itself has paid out £13.6mn to 350,000 customers by way of compensation.
“We’re sorry that we got this wrong. We’ve written and made payment to those customers affected by the discount issue and they don’t need to take any further action,” said a spokesperson from Lloyds.
“We thank the FCA for bringing this matter to our attention and since then we’ve made significant improvements to our processes and how we communicate with customers.”
As the battle to end insurance price walking continues, companies must be careful to establish a new relationship with their customers.
With instances like California auto insurers overcharging $5.5bn during the pandemic still fresh, the public’s perception of the traditional industry could quickly sour and contribute towards its decline in favour of digital-first competitors.
To recover, incumbent insurers will need to price their policies more fairly, make cover management easier, incorporate tech-based solutions where appropriate, and consider customer loyalty as a prize and not a right