Building Strong Controls for Insurtech Partnerships

Insurtech partnerships can give insurers faster claims processing, smarter pricing, better fraud detection and more responsive customer service. They can also introduce unfamiliar systems, new data flows and third-party dependencies into an organisation that may already rely on complex legacy platforms. A sound internal controls framework creates the discipline needed to capture innovation without losing visibility over risk.

For Australian insurers, this work sits within a clear regulatory environment. APRA-regulated entities must manage operational risk, information security and material service providers with evidence that controls operate in practice. Finance, risk, compliance, technology and business teams therefore need a shared approach that connects board oversight with day-to-day activities such as underwriting, claims, payments and customer administration.

Start With The Partnership Risk Profile

A control framework should begin with the specific relationship rather than a generic vendor checklist. An insurtech that supplies an artificial intelligence claims model creates different risks from a cloud platform hosting policy records or a software provider supporting broker workflows. Identify the service, the data involved, the decisions influenced and the operational processes that would be affected by failure.

Classify each partnership according to impact and dependency. A provider supporting a critical claims function deserves more scrutiny than a tool used for internal reporting. Consider financial materiality, customer harm, regulatory exposure, privacy implications, cyber risk, concentration risk and the availability of alternatives. A small start-up can create significant exposure if it becomes embedded in a core process.

Use a documented risk assessment to determine the control depth required. This avoids applying expensive assurance requirements to low-risk tools while giving executive attention to relationships that could interrupt a critical operation or compromise sensitive information.

Map Data, Decisions And Responsibilities

Data-flow mapping is one of the most valuable exercises in an insurtech review. Trace information from collection through transmission, storage, transformation, use and deletion. Include application programming interfaces, subcontractors, analytics environments, test systems and manual downloads. The map should show whether personal information, health data, payment details or commercially sensitive information crosses organisational or geographic boundaries.

Decision mapping is equally important. Record where the partner’s technology recommends, approves, rejects, prioritises or changes an outcome. For example, a machine-learning model might flag a suspicious claim, while an employee makes the final decision. That distinction affects approval controls, explainability, customer communication and accountability for errors.

Assign a control owner inside the insurer for every important activity. The technology team may manage access and integration, but the claims executive remains accountable for claims outcomes. Finance should own reconciliation and settlement controls, while privacy and legal specialists should oversee permitted data use and contractual obligations.

Build Controls Into Contracts And Onboarding

The agreement should translate the insurer’s risk expectations into enforceable obligations. Key provisions usually cover service levels, incident notification, audit rights, subcontracting, data ownership, access controls, business continuity, records retention, regulatory cooperation, secure development and exit assistance. Vague promises to maintain “industry standard” security are rarely enough without measurable requirements.

Australian organisations should align supplier arrangements with relevant APRA expectations, including CPS 230 for operational risk management and service provider oversight and CPS 234 for information security. The contract should support the insurer’s ability to understand control design, obtain assurance and respond promptly when a provider experiences an incident. Privacy obligations should also reflect the Australian Privacy Principles and the Notifiable Data Breaches scheme.

Onboarding should require evidence before production access is granted. Depending on the risk, this may include independent assurance reports, penetration testing, secure architecture documentation, privacy impact assessments, financial viability checks and proof of recovery testing. A promising demonstration at a Sydney or Melbourne industry event is useful for discovery, but it is not a substitute for due diligence.

Establish Governance Across Three Lines

Effective oversight connects business ownership, independent challenge and assurance. The first line consists of operational and technology teams that use and manage the partnership. They operate procedures, monitor performance and escalate exceptions. The second line provides risk, compliance, privacy and information security review. Internal audit forms the third line by testing whether the framework is designed and operating effectively.

Create a partnership governance forum with authority to approve risk ratings, exceptions, remediation plans and material changes. Membership may include procurement, finance, claims, underwriting, customer operations, cyber security, legal and enterprise risk. The forum should meet often enough to respond to incidents and changes, rather than becoming a quarterly discussion with no practical influence.

Board and executive reporting should focus on exposure and action. Useful measures include the number of critical providers, overdue control issues, unresolved incidents, failed reconciliations, recovery-test results, access exceptions and customer-impacting outages. Reporting should explain the consequence of each issue, the accountable executive and the date by which remediation is expected.

Control Access, Algorithms And Change

Least-privilege access is fundamental when an external platform connects to policy, claims or payment systems. Use role-based permissions, multi-factor authentication, privileged access monitoring and prompt removal of accounts when staff leave or change roles. Separate development, testing and production environments, and review service accounts as carefully as human users.

Algorithmic tools require controls that go beyond conventional application security. Establish a documented model inventory, approval thresholds, data-quality checks, version control and periodic performance reviews. Test for bias, drift and unexpected outcomes across relevant customer groups. An employee should be able to understand when a model influenced a decision and how to override it when the result conflicts with policy or evidence.

Change management should cover both the insurer and the provider. A software release, model retraining, new data source or altered API can change outcomes without looking like a traditional system change. Require advance notice for material changes, impact assessment, regression testing and approval before deployment. Maintain a rollback option for critical services.

Monitor Performance And Test Resilience

A control that exists in a policy but is never checked provides limited protection. Define key risk indicators and key performance indicators for each important partnership. These may include processing accuracy, claim referral rates, system availability, response times, unresolved defects, data-quality exceptions, failed transactions and incidents by severity.

Reconciliations are especially important where a partner calculates premiums, commissions, reserves, refunds or claim payments. Compare source records with partner outputs at agreed intervals and investigate differences within set timeframes. Finance teams should retain evidence of review, correction and approval, rather than relying on informal messages between teams.

Resilience testing should reflect realistic Australian operating conditions. Test outages during peak claim periods, telecommunications interruptions, cyber incidents, data corruption and the loss of a key subcontractor. Include manual workarounds and customer communications. A provider serving policyholders in Perth, Brisbane and regional communities may need recovery arrangements that account for different time zones, connectivity and local service capacity.

Create A Disciplined Exit And Learning Cycle

Exit planning should begin before implementation. Identify how the insurer would retrieve data, transfer configurations, maintain customer service and replace the provider if the relationship ends. Define usable formats, retention periods, migration responsibilities and support during transition. A low-cost pilot can become difficult to unwind if records and operational knowledge remain locked inside the partner’s environment.

Incident management should set out who declares an event, who contacts the provider, who assesses customer impact and who decides whether regulators or affected individuals must be notified. Run tabletop exercises with realistic scenarios, including a privacy breach, a model producing incorrect claim outcomes and an extended platform outage. Capture decisions and assign owners for every lesson.

Partnership reviews should also consider whether the arrangement continues to deliver value. Use renewal points to reassess risk, performance, financial stability, subcontractors, data use and strategic fit. Teams attending IASA Conference can compare approaches with insurance finance, operations, technology and risk professionals while building a practical network for this ongoing work.

Practical Controls To Prioritise

A phased programme can make the framework manageable while still addressing the highest exposures first. Prioritise controls that protect critical operations, sensitive information and customer outcomes, then expand the programme as governance and monitoring mature.

Innovation governance should remain constructive rather than purely restrictive. Internal controls can help product, claims and technology teams understand the boundaries within which they can experiment. Insurance organisations exploring collaborative development can also learn from resources on insurance hackathons, particularly when testing ideas before they are connected to production systems or sensitive customer data.

A robust framework turns partnership oversight into a repeatable operating capability. It clarifies who owns the risk, what evidence is required, how exceptions are handled and how the insurer will respond when technology or circumstances change. Australian insurers that embed these practices into procurement, implementation, monitoring and renewal can pursue innovation with stronger assurance for customers, regulators and the board.

Use the next partnership review to document the risk profile, map the data and decisions, test the most important controls and assign accountable owners. That practical starting point can build a reliable foundation for safer insurtech adoption across the insurance enterprise.