Estimated reading time: 6 minutes

How realistic is digital collaboration in credit insurance? Although data sharing has strong potential, the path to connectivity and interoperability is not a simple one.

Credit insurance is evolving at an unprecedented pace. Customers not only expect fast turnarounds, instant reactivity, and tailored solutions, they now demand them. 

For credit insurers to keep pace and continue to demonstrate trust and value in the future, connectivity and interoperability will be essential. Today, we look at the challenges of achieving these, and how – if addressed – the credit insurance industry will benefit.

Linking systems to deliver value

Collaboration is not a new concept for credit insurance. It has always been essential for all stakeholders – insurers, policyholders, brokers, and others – to work together to achieve successful outcomes. 

Now, thanks in part to the rapid advancement of technology (triggered during the COVID-19 pandemic), digital collaboration makes it possible for the various stakeholders to exchange information more securely and faster than ever before. 

By linking and bridging various systems, digital connectivity will mean that data can be brought together to deliver more value across the entire value chain of credit insurance. Three examples that demonstrate this are:

  • one-to-many interactions, enabling all parties to quickly be on the same page.
  • exhaustive data transfers, increasing transparency and making it easier to reach informed decisions.
  • real-time notifications, enabling faster back-and-forth communication and more efficient, frequent, and affordable reviews and approvals.

Why interoperability is key to unlocking connectivity

Despite the promise of greater value, the credit insurance industry is not yet able to fully embrace digital connectivity. Most credit insurance operations today are largely still siloed and heavily reliant on manual collaboration, with few system-to-system interactions. Due to these siloed operating models, most data remains fragmented, as each party uses it in its own specific storage and proprietary format. 

In these types of operating environments, simple connectivity has the potential to become more of a burden than a benefit, as it may provide credit insurers with too much information when they do not yet have the ability to properly leverage it. 

To optimise the benefits of connectivity and allow credit insurers to process data from other parties efficiently, interoperability is vital. Essentially, this requires parties to agree on a common format that enables each side to understand and process the data without the need for additional manual steps to re-enter or map it.

Is universal interoperability in credit insurance realistic?

For the credit insurance industry to fully leverage connectivity, significant investment will be required. At the individual operator level, it is simply not viable to build specific interoperable connections with each and every party they transact with. 

As is the case in many other industries, the solution is to have open standards that can be applied universally across the industry, removing the need for individual operators to invest in developing their own connections.

However, how this plays out may provide a challenge if some operators move faster than others, as they will bear the initial costs of establishing interoperability while not being able to fully leverage that investment due to the lag of others. 

Because it is unlikely anyone would be prepared to take on the financial burden of being an early adopter, the industry will need to ensure it does not progress at the speed of the slowest operator. 

Building interoperability where it matters

Another key consideration is that each party will still need to capture, process, and use the data through their own lens to ensure it aligns with their specific rationales, strategies, and objectives, as well as their own constraints. 

Striking the right balance will involve identifying and clearly defining exactly what information needs to be shared or exchanged, and what does not. This would allow the credit insurance industry to collaborate only on a subset of data that is meaningful to all parties.

Protecting data exchange from evolving threats 

Once the right balance of information is established, the credit insurance industry must consider how that information could be exposed to and impacted by potential data threats. 

Security risks are rapidly evolving, so successful collaboration and interoperability will require strong safeguards and monitoring controls that protect the sharing of data. Although processes and policies are important, human error also plays a part, with a report by the World Economic Forum indicating that 95% of cyber security threats can be traced to human error. 

Minimising these errors will require credit insurers to establish a strong data security culture throughout all roles and functions, enabling them to better prevent, detect and respond to cyber threats. 

What will the credit insurance industry gain from digital connectivity?

Once the credit insurance industry can address the challenges of implementing digital connectivity and interoperability, it will trigger some major transformations. These include: 

  • More holistic risk assessments: By integrating data from various sources, credit insurers can achieve a more comprehensive view of risk, using digital platforms to gain richer insights and offer more timely and tailored solutions to customers.
  • Greater potential for automation: Connectivity will enable automation that can streamline workflows and improve efficiency across the entire value chain of credit insurance. Incorporating richer data with artificial intelligence to automate processes, and using machine learning to accurately identify and anticipate risks are potential game-changers for the industry.
  • Rapid monitoring and alerts: Digital connectivity enables rapid monitoring, providing insurers with timely insights into risk degradation and potential risks. Instant alerts allow for proactive risk management and the provision of better support for customers.
  • Reduced risk and increased trust: Data sharing enhances industry-wide risk management, improving fraud detection and potentially reducing overall risk, so credit insurers may increase their capacity to take on projects. Reduced risk can also lead to increased trust, and the potential to attract greater investment.

Using blockchain for interoperability and enhanced transparency

Using blockchain technology to enable interoperability of digital credit insurance platforms has the potential to transform the industry. Blockchain allows claim processing to become more streamlined, fraud to be reduced, and data to be shared securely between parties. By creating an unchangeable, auditable record of transactions and policies, blockchain will enhance the overall level of transparency and trust within the industry. 

This would follow moves already made by the surety bond industry which has established the RiskStream Collaborative™ Surety Bonds Power of Attorney Verification Lab project, supported by Tinubu and major surety associations to accelerate transformation and simplify the adoption of blockchain technology in the industry. 

Evolving credit insurance into a more efficient and trustworthy risk mitigation tool

Digital collaboration and interoperability hold outsized potential for the credit insurance industry. Although the path to achieving this is not straightforward, digital credit insurance platforms can help by bringing several innovations together to drive greater connectivity and interoperability across the industry without the need for individual operators to build their own solutions.

If the industry succeeds in achieving this, credit insurance will be seen by current and potential customers as a simpler, more responsive, and trustworthy risk mitigation tool that can help their businesses succeed in a global marketplace.