Having spent years working with insurers, the world of banking did not seem like it would be much different. After all, there is a long history of shared ownerships.
Each are heavily governed financial institutions with a strong aversion to taking any and all unnecessary risks. They both make and receive payments, hold highly sensitive information and have a wealth of compliance officers at every turn.
However, scratch the surface just a little bit and the differences are soon quite clear. but they have different business models and therefore different technology needs.
Banks provide a wide range of financial services, including deposits, loans, payments, and investments. They need to have robust systems in place to manage these services, which include:
- Core banking systems: These systems manage customer accounts, transactions, and balances.
- Loan origination systems: These systems help banks to process and approve loan applications.
- Payments systems: These systems process electronic payments, such as wire transfers and credit card transactions.
- Investment management systems: These systems help banks to manage their own investment portfolios and provide investment services to their customers.
Banks also need to have systems in place to manage risk, comply with regulations, and prevent fraud.
Insurance companies sell policies that protect individuals and businesses from financial losses due to unexpected events. They need to have systems in place to underwrite risks, process claims, and manage their policy portfolios. Some of the key technology systems used by insurance companies include:
- Policy administration systems: These systems manage customer policies, including policy terms, premiums, and coverage.
- Claims processing systems: These systems automate the claims process, from initial notification to settlement.
- Underwriting systems: These systems help insurance companies to assess risk and set premiums.
- Data analytics systems: These systems are used to analyze customer data and identify patterns and trends. This information can be used to develop new products, improve pricing, and reduce fraud.
Insurance companies also need to have systems in place to manage risk, comply with regulations, and prevent fraud.
Different technology approaches
While banks and insurance companies share some common technology needs, there are also some key differences. For example, banks need to have systems in place to process high volumes of transactions in real time. Insurance companies, on the other hand, typically have fewer transactions, but they need to be able to process complex claims quickly and accurately.
Another key difference is the use of data analytics. Banks have traditionally been more data-driven than insurance companies, but insurers are increasingly investing in data analytics to improve their underwriting, claims, and marketing operations.
Examples of technology approaches
- Mobile banking apps: Banks are using mobile banking apps to allow customers to access their accounts and make transactions on the go.
- Artificial intelligence (AI): Banks are using AI to improve fraud detection, automate customer service tasks, and develop personalized financial advice.
- Blockchain: Banks are exploring the use of blockchain technology to improve the efficiency and security of payments and other transactions.
- Insurance companies:
- Insurtech: Insurance companies are partnering with insurtech startups to develop new products and services and improve their operations.
- Telematics: Insurance companies are using telematics data from vehicles to better assess risk and offer personalized pricing.
- Wearable devices: Insurance companies are using data from wearable devices to develop new health insurance products and services.
Overall, banks and insurance companies are both using technology to improve their operations and customer experiences. However, there are some key differences in their technology needs due to their different business models.
It is the approach to risk where the biggest differences can be seen. Insurers, because of a limited transactional model, can afford to be more risk adverse. They don’t engage with the customer on a daily basis unless there is a claim.
Banks on the other hand, do engage on a daily basis. They do not like the increased risk of cloud computing and insure tech software, but knowing that their customer base are going to use it, each supplier is risk accepted.