Amid a rising global trend driven by increasing cyber threats, operational disruptions, and heightened consumer protection expectations, the insurance industry is facing stricter compliance and regulatory oversight.

Australia’s introduction of CPS 230 is a proactive step toward aligning with international standards, strengthening operational resilience, and enhancing accountability across the sector.  CPS 230 is being introduced to ensure banks, financial services companies and insurers protect their customers from cyber security, data breaches and unnecessary delays in settling claims.

As the CPS 230 operational risk management standard from APRA comes into effect in July 2025, insurers across Australia are facing increased pressure to tighten their compliance and governance frameworks.

This regulation demands robust oversight of operational risk, third-party service management, and incident response, placing a heavy spotlight on how insurers handle data, documents, and internal processes, to build a foundation for trust, speed, and agility for customers, not only minimising the risks.

CPS 230 at a Glance

CPS 230 sets new requirements for:

• Operational Risk Management: Institutions must identify, assess, and manage key operational risks.
• Third-Party & Outsourcing Oversight: Critical service providers must be monitored and risks mitigated, including brokers and underwriting agencies with binding authority.
• Incident Management & Business Continuity: Real-time response capabilities and robust documentation are expected.

Failing to comply could result in regulatory sanctions, loss of public trust, or reputational damage.

When breach of CPS 230 occurs, APRA doesn’t impose "fines" like a criminal court, but it has strong enforcement powers such as license conditions or suspensions, public reprimands, increased capital requirements, and civil penalties in cases of systemic failure. 

Even if the third party (e.g., broker, underwriter) made the mistake, the regulated entity (insurer or financial institution) is responsible, because under CPS 230 the regulated entity is accountable for managing risks, terms and monitoring performance from material service providers.  Put quite simply, regulated entities cannot outsource accountability, even if the function is outsourced.

In this context, Intelligent Document Processing (IDP) and Process Orchestration technologies have emerged as powerful allies. These tools have been proven solutions for many regulated entities and will now be critical for their 3rd parties for leverage to improve efficiency and act as critical safeguards against compliance breach risks.

IDP uses AI technologies such as OCR, NLP, and machine learning to automate the extraction of data from both structured and unstructured documents. It eliminates manual data entry, applies business rules across systems, classifies and routes data to downstream processes, and ensures regulatory compliance in documentation. 

IDP & Process Orchestration/Automation Help Mitigate Compliance Risks

TCG Process’s DocProStar is an AI powered IDP platform including powerful orchestration capabilities to seamlessly integrate AI technologies, systems of record and humans into secure   business processes.  Here’s how these technologies support CPS 230 compliance for regulated entities:

1. Operational Consistency Through Process Standardisation: Process Orchestration and Automation enforces uniform procedures across underwriting, claims, onboarding, and reporting processes to reduce human error and ensure consistent handling of compliance-sensitive operations.

2. Accurate & Compliant Document Processing: IDP captures, validates, and cross-checks data from customer forms, ID proofs, contracts, and medical records to ensures mandatory fields and disclosures are always present and up to date.

3. Full Audit Trails & Realtime Monitoring: Every step in an automated workflow is timestamped and logged, creating ready-to-use audit trails for easy reporting to APRA and transparent operational risk oversight.

4. Automated Risk Alerts & Escalation: Rules-based automation can detect anomalies (e.g., missing disclosures, expired IDs, or fraud flags) and trigger escalations before a breach occurs to comply with incident management obligations.

5. KYC & AML Compliance Made Efficient: IDP reads and verifies customer documents for KYC and runs them through AML watchlists to speeds up onboarding while maintaining compliance integrity.

Real-World Insurance Compliance Use Cases for IDP

Looking more closely at insurers and their broker relationships and the key business processes of onboarding/underwriting and claims, IDP aids compliance as follows.

For Policy Onboarding:

• Customer Application Submission: IDP ensures all regulatory language is present in policy documents and collection of mandatory disclosures by automated data extractions from application forms
• Application collection & verification – IDP classifies different document types and flag missing or invalid documents and data across cases.
• Application compliance checks – Process Orchestration can invoke KYC and Compliance AIs to verify customer details against sanction lists, watchlist.  IDP extracts data from IDs and documents and check for the currency and mismatch between documents.  Orchestration/Automation runs AML checks, flags high-risk profiles, and stores records securely.
• Automated Risk Scoring and Underwriting Inputs – IDP extracts key data points (e.g. smoking status, BMI from health reports or lifestyle disclosures) and feed into underwriting rules engine or ML model for risk evaluation and recommendation (Extractive AI)

For Claims Processing IDP and AI verifies claim documentation and compares to policy coverage rules and approves or escalates based on pre-defined compliance logic for:

• disclosure & transparency (e.g. ASIC’s RG 271 Internal Dispute Resolution, General Insurance Code of Practice),
• timely acknowledgement and resolution (e.g. acknowledgment within 10 business days, resolution within 4 months),
• privacy & data handling – personal and medical information must be securely stored and only used for claiming related purposes (e.g. Australian Privacy Act)
• fraud detection & recording in line with internal fraud management policies (e.g. claiming for pre-existing damage, staged accidents, fake invoices)
• customer consent for third-party access (e.g. claimant’s explicit consent is required for assessor or repairer, CPS 230’s emphasis on third party risk and customer transparency)
• proper use of approved vendors (any service provider e.g. repair shop or investigator must be vetted and compliant)

Next Steps for Insurers:

Most insurers have automated in part or completely their ingestion, underwriting and claims processes using various forms of IDP.  Recent developments in AI technology, however, have even the most mature insurers investigating opportunities for further improvement.  The accuracy and performance of processes implemented 5 years ago, have simply been superseded in the last 3 years. 

Insurers will continue to enhance these processes as it pays dividends in terms of customer service and operating costs.  The challenge imposed by regulations like CPS 230 in Australia is that insurers will be accountable for managing risks from their 3rd party/material service providers (brokers, underwriters), and must work with them to monitor and ensure their compliance. 

Historically brokers have operated on thinner margins and underinvested in process automation, so ensuring their compliance will be more challenging.

IDP and Process Orchestration technologies will enable insurers and their brokers to meet the higher regulatory standards and do so at scale.  Here are a few approaches to consider:

Extend insurer’s systems and processes to their brokers for monitoring and automation to ensure the 3rd party compliance

Adding a layer of 3rd party compliance to insurer’s contracts with brokers (i.e. mandating certain info at a certain time, in the insurers’ systems) to facilitate monitoring and escalations

Switching to 3rd party brokers with adequate systems for compliance

Implement contractual safeguards upon identifying gaps and agreeing on a structured program for the 3rd parties to improve their processes over a certain period using IDP with insurer oversight for monitoring performance

IDP systems allow insurers and brokers to build automation processes to suit their business needs along with a shared overlay for monitoring purposes, and that’s just the beginning.  More importantly, it provides a platform for continuously improving customer service, operating performance and governance.  It is hard to see insurers and their eco-systems building a sustainable future without IDP and orchestration.

Final Thoughts: A Compliance-First Future

CPS 230 is not just another regulatory checkbox - it’s a cultural reset and a strategic opportunity for the whole of the supply chain within the insurance industry to modernise to effectively respond to the catastrophes and cyber events as well as address the usual customers’ needs.

It raises the bar for trust, accountability, and resilience. Embracing Intelligent Document Processing and Process Orchestration now not only prepares you for the July 2025 deadline but also positions your organization for sustainable compliance and resilience. 

By embedding intelligence into your core processes, you don’t just minimize breach risks - you build a foundation for transparency, speed, and agility in a highly regulated market.

Sunjoo Kim is Chief Experience Officer at TCG Process.