Managing Radical Technological Changes in the Swedish Insurance Industry: the Challenge of Regulatory Compliance
Abstract: This study concerns investigating an industry, i.e. system, which is subject to radical technological changes, and how actors within the system can enhance their innovation processes and manage technological shifts efficiently. The specific context in which these processes are investigated is the compliance departments within the Swedish insurance industry. The Swedish insurance industry constitutes a central pillar in the national economy, which is why the stability of the industry must be ensured. As a result, the insurance industry is subject to various regulations and the scope and amount of regulations have increased since the global financial crisis in 2008. In other words, the regulatory burden has increased while the risks of non-compliance pose a threat to incumbents' competitive position. In order to meet the pressure of increased regulatory burden as well as leverage on the pressure of digitalization, Regulatory Technology (RegTech) has been identified as a key focus area for Swedish insurance companies in enhancing their operational efficiency as well as reduce the risk of non-compliance. Consequently, the purpose of this study is to identify system challenges to adoption of RegTech as well as system enablers which suggest how the related innovation processes can be facilitated. The empirical data in this study consists of ten in-depth interviews with representatives from Swedish insurance companies as well as knowledge providers within RegTech. The study reveals 38 system challenges and 38 system enablers to adoption of RegTech in various dimensions related to market forces, organizational factors and product development aspects, to mention a few. The most commonly raised system challenges are based on that RegTech is related to cost-reduction and thus has limited impact on revenue-generation as well as the fact that the insurance industry is characterized for being conservative and rigid, to name a few. Two examples of commonly mentioned system enablers are increasing regulatory pressure which leads to uneconomical and resource-intensive compliance operations with an increasingly high risk of non-compliance, as well as that younger insurance companies have to deploy RegTech in order to survive in the long run. The results from the study are presented at landscape-, regime- and niche-level according to the theoretical frameworks of Multi-level Perspective of Sociotechnical Systems and Absorptive Capacity in conjunction with a relevant theoretical framework within compliance management, denoted the Efficient-investment-risk model.
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