Business
Which Cloud architecture model is best for Insurtech?
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Adam Gaca, Head of Managed Services & CloudOps at Future Processing
It’s no surprise that insurers are quickly adopting Cloud solutions as part of their core technology platforms, modifying legacy systems to make way for digitally advanced software. Global cloud infrastructure service spending increased to $57 billion in Q3 of 2022, bringing the industry total for the previous twelve months to $217 billion. There are numerous ways for insurers to use the Cloud to improve their business operations, particularly when it comes to deploying new applications or services, reducing time to market, and improving data storage and backup resilience.
The insurance industry was one of the first to embrace Cloud computing, with nearly 60% of companies utilising the technology in some capacity. There are several reasons for this, the most important of which is that it allows for greater agility and can handle large amounts of traffic, making it the ideal platform for insurers to scale their offerings during periods of high activity. The insurance industry is highly competitive and regulated, and companies must be able to respond quickly to changes in the market, making the Cloud the perfect solution. It can, furthermore, be used to connect Insurtech systems to third-party providers via APIs, giving them access to better functionalities and improving customer service with real-time responses.
Different Archetypes for Different Requirements
There is no doubt that Cloud computing has transformed the insurance industry, but the most important question for IT leaders in this space is: what Cloud architecture model is best for their business? They have three options for Cloud architecture: public, private, and hybrid, each with its own set of challenges and benefits. The best cloud architecture for a company is determined by several factors, including the type of data they are working with, their budget, and the level of control they require over the infrastructure. Companies must consider the advantages and disadvantages of each type of Cloud architecture to determine which best meets their business requirements.
Public Cloud Architecture
The public Cloud has democratised technology, allowing businesses of all sizes to access the same level of innovation and scale as the largest corporations. A third-party service provider owns and manages this cloud infrastructure, and the resources are made available to the general public via the Internet. It provides lower upfront costs because resources are paid based on usage, elasticity, and scalability, allowing insurers to adjust resource usage as needed. Finally, it lowers IT costs as the service provider handles most of the infrastructure maintenance.
However, the public Cloud is not without its drawbacks. Limited upfront costs also mean limited control over the infrastructure and security. And with that comes the potential for privacy concerns, as data is stored in a third-party data centre. Public Cloud providers implement a variety of security measures to protect their customers’ data, but there is always a risk of data breaches, data loss, or unauthorised access. Ultimately, the greatest challenge comes with the possibility of service outages or disruptions due to shared infrastructure and dependence on internet connectivity.
Private Cloud Architecture
This is a Cloud infrastructure owned and managed by a single insurer, and the resources are only used by that organisation. Private Clouds enable faster and more flexible deployment of new applications, resources, and services than traditional IT infrastructure, while also providing greater control and security for sensitive data and applications. This means it’s an excellent Insurtech solution, as the industry has its own set of regulatory compliance. Furthermore, as long as it is well designed and maintained, it provides greater reliability than public networks.
Nevertheless, the advantages of a private solution entail much higher upfront costs as well as ongoing costs for infrastructure maintenance. Furthermore, the complexities of implementing this type of solution result in companies having limited scalability compared to a public Cloud. Finally, a private Cloud requires a team to manage, maintain, and adjust it as needed, which means insurers will need an in-house IT team with infrastructure expertise.
Hybrid Cloud Architecture
This Cloud infrastructure combines both public and private Cloud architectures, allowing insurers the flexibility to utilise both benefits. Beyond the obvious advantages of elasticity in a hybrid architecture, it also proved unprecedented scalability, depending on usage and workload requirements. What’s more, the hybrid Cloud delivers all the security and compliance needed to manage sensitive data in the insurance industry, while still providing flexibility.
However, with the integration of different solutions comes complexities. Integrating data between public and private Clouds can be challenging, as data may need to be migrated between different systems and formats, and data consistency and synchronisation must be ensured. Moreover, ensuring connectivity between public and private Clouds can be challenging, as different network architectures and protocols may be involved, and security and performance requirements must be addressed, especially in the insurance industry where most data is highly sensitive. Furthermore, as with any IT solution, there is a potential for security and data privacy issues if not properly managed.
Choosing The Right Tech
Cloud computing can provide greater agility and scalability while also handling high volumes of traffic, making it an ideal platform for insurers. But choosing a solution necessitates a thorough understanding of an organisation’s goals, processes, and challenges and an in-depth understanding of the capabilities and limitations of available technologies. The key to selecting the right Cloud type for insurers is to concentrate on solving specific business problems and identifying the technology that best addresses those problems.
Each of the three Cloud architectures has its own set of challenges and benefits, and insurers must weigh the pros and cons of each to determine which one best meets their needs. Choosing the right Cloud architecture model is critical to success in the insurance industry, whether a company is looking for lower upfront costs, greater control over infrastructure and security, or the flexibility to leverage the benefits of both public and private Clouds.
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Business
Building Compliance into Business Culture is Essential in Fintech
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Source: Finance Derivative
Tetyana Golovata, Head of Regulatory Compliance at IFX Payments
Regulation plays a critical role in shaping the fintech landscape. From Consumer Duty and FCA annual risk reporting to APP fraud, the tectonic plates of the sector are shifting and whether you consider these regulations as benefiting or hindering the industry, businesses are struggling to keep up.
According to research by fraud prevention fintech Alloy, 93% of respondents said they found it challenging to meet compliance requirements, while in a new study by Davies a third of financial leaders (36%) said their firms had been penalised for compliance breaches in the year to June. With the FCA bringing in its operational resilience rules next March, it is more important than ever to ensure your company makes the grade on compliance.
Lessons from history
Traditionally, FX has struggled with the challenge of reporting in an ever-developing sector. As regulatory bodies catch up and raise the bar on compliance, responsible providers must help the industry navigate the changes and upcoming deadlines.
Fintechs and payments companies are entering uncharted waters – facing pressure to beat rivals by offering more innovative products. When regulators have struggled to keep up in the past, gaps in legislation haveallowed some opportunists to slip between the net, as seen in the collapse of FTX. Because of this, implementation and standardisation of the rules is necessary to ensure that innovation remains seen as a force for good, and to help identify and stamp out illegal activity.
Culture vs business
Culture has become a prominent factor in regulatory news, with cases of large fines and public censure relating to cultural issues. As the FCA’s COO Emily Shepperd, shrewdly observed in a speech to the finance industry, “Culture is what you do when no one is looking”.
Top-level commitment is crucial when it comes to organisational culture. Conduct and culture are closely intertwined, and culture is not merely a tick-box exercise. It is not defined by perks like snack bars or Friday pizzas; rather, it should be demonstrated in every aspect of the organisation, including processes, people, counterparties, and third parties.
In recent years, regulatory focus has shifted from ethics to culture, recognising its crucial role in building market reputation, ensuring compliance with rules and regulations, boosting client confidence, and retaining employees. The evolving regulatory landscape has significantly impacted e-money and payments firms, with regulations strengthening each year. Each regulation carries elements of culture, as seen in:
- Consumer duty: How do we treat our customers?
- Operational resilience: How can we recover and prevent disruptions to our customers?
- APP fraud: How do we protect our customers?
Key drivers of culture include implementing policies on remuneration, conflicts of interest, and whistleblowing, but for it to become embedded it must touch employees at every level.
This is showcased by senior stakeholders and heads of departments facilitating close relationships with colleagues across a company’s Sales, Operations, Tech and Product teams to build a collaborative environment.
Finance firms must recognise the trust bestowed on them by their customers and ensure the protection of their investments and data is paramount. Consumer Duty may have been a wake-up call for some companies, but progressive regulation must always be embraced and their requirements seen as a baseline rather than a hurdle.
Similarly, the strengthening of operational resilience rules and the upcoming APP fraud regulation in October are to be welcomed, increasing transparency for customers.
Compliance vs business
Following regulatory laws is often viewed as a financial and resource drain, but without proper compliance, companies are vulnerable to situations where vast amounts of money can be lost quickly.
A case in point is the proposed reimbursal requirement for APP fraud, which will mean payment firms could face having to pay compensation of up to £415,000 per case.
Complying not only safeguards the client and their money, but also the business itself. About nine in ten (88%) financial services firms have reported an increased compliance cost over the past five years, according to research from SteelEye. Embedding compliance earlier in business cultures can be beneficial in the long run, cutting the time and money needed to adapt to new regulations and preventing the stress of having to make wholesale changes rapidly.
Building a cross-business compliance culture
Compliance is a key principle at IFX, and we strive to be a champion in this area. In response to these challenges, the business restructured, establishing dedicated risk and regulatory departments, along with an internal audit function.
Regulatory compliance aims to support innovation by developing and using new tools, standards, and approaches to foster innovation and ensure product safety, efficacy, and quality. It has helped the firm to navigate the regulatory landscape while driving growth and maintaining high standards.
This organisational shift allowed each business line to own its own risk, with department partaking in tailored workshops designed to identify existing, new, and potential risk exposure. Shared responsibility for compliance is the only way to create a culture which values it. We see this as a great way for organisations to drive innovation while sticking to the rules.
Business
How AI virtual assistants are transforming education and training
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By Gregor Hofer, CEO and Co-founder at Rapport
What separates good doctors from excellent doctors, the type that might get five-star reviews if, like an Uber driver, their services were supported by a smartphone app?
Medical knowledge, expertise, and better outcomes are, of course, the most important factors. But – particularly when dealing with patients’ relatives, discussing risk assessment and imparting bad news – we shouldn’t underestimate the importance of bedside manner.
This might come naturally to some doctors but there are none for whom training isn’t useful, whether at medical school or on the job.
There will always be a place for real human interaction in this training, the type that involves role-play, with actors or colleagues playing out different scenarios that explore the most effective ways to handle difficult situations.
But what if this could be supplemented by more readily available and less resource-intensive experiences that simulate these training environments? And what if it could be applied across numerous sectors, industries and professions, of which there are a great many that could benefit from such an opportunity?
What might that mean for those instigating tricky conversations and, perhaps more importantly, those at the receiving end of them?
Advances in generative artificial intelligence – or GenAI – mean that these are no longer hypothetical questions.
There’s no limit to the type of person this technology could help, but we’ll review three – doctors, those working in corporate HR, and online students – to give a flavour of the benefits it brings.
Before we do, a quick word on how such applications work.
An overview of the technology
It all starts with data. With access to enough content, the type that you store and curate on your internal systems, large language models (LLMs) can be trained to find the most appropriate response to whatever user input they’re exposed to, whether in writing or spoken, and then you as a user can respond to that response, and so the cycle continues.
You’ll have experienced something similar using the likes of CharGPT, but because this is based on your own content, you’re more in control. (For simpler and more prescriptive scenarios, though, I’d add that with the best solutions, you can alternatively import predefined branching dialogue to keep your conversations on track.)
It doesn’t stop there, though; by tapping into a solution that’s supported by experts in linguistics and computer-aided animation, your colleagues can interact in real-time with avatars equipped with believable facial expressions, accurate lip-synching capabilities, natural gestures and the ability to detect emotions.
All of this adds to the user’s willing suspension of disbelief that they’re interacting with a real person, or AI avatar, thereby enhancing the effectiveness of their learning.
These innovations are reshaping how we approach learning and skill development in so many critical fields. We said we’d look at three. We’ll start by returning to medicine.
Medical training
AI assistants can supplement the way doctors are taught to break bad news to patients, one of the hardest things they’ll face in practice and, given its subjectivity, something that can’t easily be looked up in a textbook on anatomy or physiology.
As we said from the outset, this is easier for some doctors than others, but given the literal life-and-death nature of such conversations and the shattering impact that the death of a loved one can have on a relative, there’s always room to improve medics’ empathy and communication skills – which is exactly what this technology delivers.
By utilizing experiential AI tools, clinicians can better use their time, alleviate pressure, fatigue and burnout symptoms, and ultimately allow them to better serve their patients.
Corporate HR
In corporate HR, virtual assistants can significantly streamline and enhance the hiring and firing process, as well as any difficult conversation; whether it’s a tough review, a disciplinary hearing, letting down an employee about a promotion they’d applied for or any other scenario that might bring a bead of sweat to your forehead, it’s all about providing safe and cost-effective practice before doing it for real.
Tech research consulting firm Gartner recently found that more than three-quarters (76%) of HR leaders believe that if their organisation doesn’t adopt and implement AI solutions, such as generative AI, in the next 12 to 24 months, they’ll lag in organizational success compared to those that do, while 34% of HR leaders participating in their January benchmarking session said they were exploring potential use cases and opportunities when it came to generative AI.
If they do manage to adopt the right technology, the impact will be massive among those who deploy it wisely. After all, which company wouldn’t want to upskill its HR professionals in tangible soft skills such as empathy, communication, problem-solving, and conflict resolution in a controlled setting?
Online education
AI-powered tools can hugely boost student engagement in remote learning environments, and the research suggests that it comes close to rivalling in-person experiences. When you consider the staff-to-student ratios common in most educational settings, this should be no surprise – think how many students can fit into a lecture hall (even if they don’t always turn up!).
But we’re not necessarily talking about formal education; this applies equally to any informal setting in which someone needs to improve their education in some way.
With this technology, you can invent new ways to educate your students – or staff – by transforming lessons into experiences, using interactive characters reflective of the subject. This means you can increase user satisfaction and performance without compromising on content.
Whatever the scenario and whatever the use case, the chances are that if you have the right content in sufficient quantities, you can tap it for interactions that would otherwise be lacking in uniqueness or prohibitively expensive.
With AI virtual assistants, everyone’s a winner.
Business
How GenAI is Shaping the Future of Compliance
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Gabe Hopkins, Chief Product Officer, Ripjar
Generative AI or GenAI uses complex algorithms to create content, including imagery, music, text, and video with amazing results. Less well known are some of the ways in which it can transform data processing and task performance. This groundbreaking technology not only saves time, effort, and money, but has become a game-changer in enhancing operational efficiency and fostering innovation across various sectors.
However, some industries like anti-financial crime compliance – have been slow to adopt new innovations like GenAI, predominantly due to concerns over potential risks. In fact, they can even see it as a risk in itself. Legal, Compliance and Privacy leaders rank rapid GenAI adoption as their top issue in the next two years, all while other, less risk-averse organisations enjoy the upside of implementing GenAI in their systems.
This delay means many compliance teams are not taking advantage of AI tools that could revolutionise their processes and help them save up to 200 hours annually per user.
Entering the New Era of GenAI in Compliance
Teams in largely regulated sectors like banking and fintech face enormous pressures. Their responsibilities include identifying risks, such as sanctioned individuals and entities, updating policies to keep up with ever-evolving regulations, and handling expansive datasets. The high volume of this data makes manual reviews exhausting and susceptible to errors, which can lead to financial and reputational damage.
One way to overcome these challenges is by leveraging GenAI. For example, false positives – where a risk is raised incorrectly or false negatives, where a real risk is not flagged, are common issues caused by trying to deal with very high volumes of alerts and risk matches. Implementing GenAI can reduce these inaccuracies, significantly enhancing the efficiency and effectiveness of customer and counter-party screenings.
In practical terms, GenAI can reinvent how compliance tasks are performed. For instance, in drafting Suspicious Activity Report (SAR) narratives, where analysts need to justify suspicions in transactions, GenAI can help automate this writing process, combining human oversight with artificial efficiency. Platforms using GenAI excel in summarising vast amounts of data— crucial for tasks like screening adverse media, where they assist in identifying potential risks linked to negative information about clients.
Understanding the Opportunities of GenAI and Overcoming Fears
For the compliance sector, it’s a crucial time to explore how to incorporate GenAI effectively and securely without undue risks. Dispelling fears about data misuse, the high costs of initial model setups, and the ‘black box’ nature of AI models are central to this transition. Teams are particularly cautious about sharing sensitive data and the hidden biases that AI might carry.
Yet, some strategies can counter these challenges. By choosing suitable models that ensure robust security and privacy and adjusting these models within a solid statistical framework, biases can be mitigated. However, organisations will need to turn to external expertise – whether data scientists or qualified vendors – to support them in training and correctly deploying AI tools.
The latest advancements in GenAI suggest that virtual analysts powered by this technology are achieving, and sometimes surpassing, human-level accuracy. Despite ongoing concerns, which may slow adoption rates, the evident potential benefits suggest a bright future for compliance teams using GenAI. These technological innovations promise not only to improve speed and efficiency but also to enhance the capability of teams to respond and adapt swiftly.
Embracing GenAI will not only significantly elevate the effectiveness of compliance operations but also safeguard organisations against potential pitfalls while maintaining trust and integrity in their industry practices.
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Building Compliance into Business Culture is Essential in Fintech
![](http://www.futuresparity.com/wp-content/uploads/2023/03/b-5-80x80.jpg)
How AI virtual assistants are transforming education and training
![](http://www.futuresparity.com/wp-content/uploads/2023/04/b-5-80x80.jpg)
How GenAI is Shaping the Future of Compliance
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The Sustainability Carrot Could be More Powerful Than the Stick!
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Hybrid cloud adoption: why vendors are making the switch in 2022 and why you should too
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