Key Points
- UK insurers and brokers must be aware of the risks associated with buying technology from vendors.
- The regulator emphasizes that accountability cannot be outsourced, and is personal and named on the record.
- Insurers must decide what to build and what to buy, and balance the risk of getting that wrong.
The Risks of Outsourcing Technology
Buying technology from a vendor is common across the insurance industry, but it doesn't mean you're transferring the risk. In fact, the regulator emphasizes that accountability cannot be outsourced and is personal and named on the record.
Under the FCA's senior managers and certification regime, insurers must take responsibility for the risks associated with vendor technology. This means deciding what to build and what to buy, and balancing the risk of getting that wrong.
Experts warn that relying too heavily on vendors can lead to a loss of competitive edge, as someone will eventually do it better. The vendors you choose shape your capability, but what they do in your name stays your responsibility.
At a Glance
| FCA Regime | Senior Managers and Certification Regime Regulatory framework emphasizing personal accountability |
| Vendor Risks | Commodity infrastructure, cloud hosting, CRM tools Types of technology that can be outsourced |
| Accountability | Personal, named on the record Regulatory requirement for insurers |
Where the Sides Stand
UK Insurers
Position: Must take responsibility for vendor risks
Role in the story: Regulatory requirement
Motivation: Prevent regulatory non-compliance
Vendors
Position: Cannot transfer accountability to insurers
Role in the story: Regulatory requirement
Motivation: Maintain regulatory compliance
Why Accountability Can't Be Transferred
Why Accountability Can't Be Transferred
The regulator emphasizes that accountability cannot be outsourced, and is personal and named on the record. This means that insurers must take responsibility for the risks associated with vendor technology, and cannot transfer that responsibility to the vendor contract.
Navigating the Balance Between Buying and Building
Navigating the Balance Between Buying and Building
- Determine what technology can be outsourced to vendors, and what must be built in-house.
- Balance the risk of getting that wrong, and consider the competitive implications of relying too heavily on vendors.
- Take responsibility for the risks associated with vendor technology, and ensure that accountability is maintained.
Risk & Opportunity Assessment
| Commercial Risk | Medium | Relying too heavily on vendors can lead to a loss of competitive edge |
| Regulatory Risk | High | Failure to maintain accountability can result in regulatory non-compliance |
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