The path to digitalisation for UK schemes and captives

Technology is driving significant change across traditional business models of insurance, and digital transformation has become the key to staying competitive.

Much of the focus remains on opening digital distribution channels and driving speed to market through these channels. However, digital strategies are also being deployed in adjacent corners of the re/insurance market to enhance customer value, remain compliant and drive efficiencies.

For example, models to manage multiple layers and modes of distribution have been successfully deployed around the world, and UK captive managers and insurance schemes operators should pay close attention.

Transformation in both UK captive and scheme businesses has lagged because of challenges around regulatory complexity and the highly tailored nature of their operations.

In captives, the Financial Conduct Authority (FCA) and Prudential Regulation Authority impose strict governance and risk management frameworks, which make scaling distribution via digital channels more challenging. Similarly, schemes business, where products are highly customised for niche markets, face complex regulatory oversight, particularly around compliance with consumer protection laws, pricing transparency, and product governance.

As it stands, navigating these regulatory frameworks across each individual captive company or scheme member requires significant time and resources when using legacy tech infrastructure or manual processes, slowing down the pace of delivery.

Another shared challenge is the bespoke nature of the captive and scheme offerings. Captives are tailored to meet the specific risk needs of their parent companies, while schemes are designed for unique customer segments or industries. There is an increasing urgency to adopt modern, flexible technology over the legacy systems that are slowing many captives and schemes down.

Hybrid approaches to administration

Culturally, both captive and scheme managers focus on relationship-based underwriting and administration. Deep customer relationships will remain core to their operating model, although this does not mean having to settle for manual operations.

Pure reliance on human expertise, to the exclusion of automated systems, has contributed to the slow adoption of digital solutions. However, as regulatory demands for transparency and operational efficiency grow, both sectors are gradually recognising the need for digital tools to stay competitive and compliant. Those that are experimenting with new digital strategies are finding they are leaping forward in efficiency without compromising on their relationship-centric approach.

Guardrisk, a South African pioneer in cell captive insurance, is a useful case study. The concept of cell captives, which enable multiple entities to share risk under a single regulatory framework, is inherently complex. Managing such intricate programmes requires a robust technical infrastructure that ensures both efficiency and compliance.

There is an increasing urgency to adopt modern, flexible technology over the legacy systems that are slowing many captives and schemes down

At Guardrisk, the solution to this complexity has been the adoption of a common digital architecture, a model we believe is ripe for replication in the UK market, particularly in schemes and captive business. With the right technology in place, the entire product development and roll-out process as well as underwriting and administration become more transparent, precise, and adaptable.

Apart from the increased speed at which tailored insurance products can be rolled out, leveraging digital architecture also means centralising, streamlining and automating administrative and compliance tasks. This in turn allows businesses such as captives and schemes to be more responsive to the unique and often evolving needs of their member organisations.

The ability to manage a wide variety of insurance programmes from a single platform ensures that businesses can focus on what really matters: delivering value to their customers. In a market like the UK, where regulatory requirements are increasingly stringent, the efficiency gained from a common digital architecture is not just a competitive advantage – it is fast becoming a necessity.

Unlocking data-driven precision

What truly sets digital transformation apart in the captive and schemes space is its potential to deliver highly precise, data-driven solutions. As we have seen with Guardrisk, the integration of advanced technology into insurance operations enables near real-time insights that improve decision-making across the board.

For instance, the quality of data being collected and analysed through a digital platform allows insurers to more accurately assess risk, adjust pricing and deliver tailored coverage that meets the specific needs of policyholders.

This precision is particularly valuable in the UK, where the insurance market is facing growing pressure from the FCA to improve transparency and ensure that products are fair, clearly priced, and deliver value to customers.

As the UK’s focus on consumer duty intensifies, there is an increasing need for insurers to justify the value of their commission structures and distribution practices. A digital-first approach not only allows insurers to operate more transparently but also gives them the tools to demonstrate how their products are designed to deliver tangible benefits to customers.

This approach also enables insurers to quickly adjust their offerings in response to regulatory changes as well as their customers’ needs, and also empowers them, when delegating authority out to managing general agents and brokers, to more effectively monitor and oversee compliance with mandates and relevant regulatory requirements.

Bringing together fragmented processes

A well-structured digital platform provides clearer insights into commission structures and distribution costs, unifying previously fragmented processes. It also ensures data related to product performance and customer outcomes is readily available, making it easier to demonstrate compliance with new standards.

For schemes and captives, this means a common digital architecture does not just improve operational efficiency; it also unlocks the ability to deliver data-driven value and enhance transparency, ensuring all stakeholders – from insurers to regulators – have a clear view of how products are performing and whether they are delivering value.

This is particularly important when considering the complex distribution networks often associated with captive and schemes programmes. By streamlining the flow of information through a digital platform, it becomes easier to identify areas where costs can be reduced, processes simplified or where practices are falling foul of UK regulation.

A digital future

Guardrisk’s example in South Africa has shown us what’s possible when digital technology is fully integrated into the insurance value chain. The success of this model has demonstrated the potential for digital architecture to drive not only efficiency and speed to market but also significant improvements in customer outcomes and compliance. In the UK, where schemes and captives play a critical role in the insurance market, the time is ripe for embracing this kind of transformation.

The digital transformation of the UK’s scheme and captive business is not about flashy, disruptive technology. It is about providing the technical foundation that allows insurers to work smarter, faster, and more effectively, all while delivering greater value to their customers. The future of insurance is digital, and those who embrace this change will be well-positioned to lead the market in the years to come.

Charlotte Koep is chief executive of Root