The use of automated reinsurance administration technology is growing, but only one out of three insurers is reaching that level. The remaining two-thirds are still using partially automated or manual systems.

According to a survey conducted on behalf of Inpoint Services, an Aon company, 32 percent of insurance companies use comprehensive technology systems to support their reinsurance processing, up from just 17 percent in 2005. However, 42 percent of insurers still use partially automated systems and 26 percent rely on manual processes, such as spreadsheets.

The survey of 138 insurers found there is a direct correlation between company size and technology use. Only 23 percent of smaller firms (those with less than $100 million in ceded premium) have fully automated systems, while 57 percent of large companies (those with more than $500 million in ceded premium) have fully automated systems. Even among companies that are highly automated, size dictates the type of systems used. Small companies tend toward off-the-shelf software, while larger firms tend to develop their reinsurance administration technology in house.

"Considering that reinsurance recoverables are among most insurers' largest assets, the number of companies relying on partially automated or even manual systems is surprising," says Mark Richtmyer, senior account executive at Inpoint Services. "Fortunately, the survey found that the use of fully automated technology is growing. That said, companies contemplating new technology should give special consideration to how they will integrate their new systems with the processes and human resources currently in place."

The survey found nearly 20 percent of responding companies have used the same partial or comprehensive reinsurance administration technology for more than 15 years. Only 27 percent of companies said their systems were less than five years old. Reasons cited for the reluctance to update systems include budgetary constraints and lengthy implementation periods. Many firms claim their existing systems meet their current reinsurance processing needs.

Electronic document storage, in the opinion of those surveyed, increased efficiency by at least a two-to-one margin. Sixty-two percent of respondents said they electronically stored all their contracts, 49 percent electronically stored all their claims, and 44 percent stored all their reports this way. The wider usage of electronic storage for contracts is likely due to the static nature of the documents and the need for access by multiple users.

While technology typically boosts efficiency, the survey found that large companies with highly automated systems do not receive reinsurance payments as quickly as companies with less comprehensive technology. However, the delays are attributed to other reasons as improper loss notices and insufficient loss documentation.

Inpoint Services' survey of managers and executives at 138 insurance companies in the U.S., Canada, and Bermuda was conducted in 2009 by the Leede Group. The entire report can be viewed at www.Inpoint.com.

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Reinsurance Technology Usage Up, but Insurers Still Lag Behind

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