Does Technology Adoption Save Regulatory Compliance Costs

We study whether digital technology streamlines the regulatory process and reduces the costs of complying with regulation. To identify the effect of digital technology on regulatory compliance costs, we leverage a quasi-experimental policy change which mandates the use of an internet-based flow management tool that enables insurers and regulators to exchange policy form and rate filing information. We find that digitization lowers the costs of complying with regulation. The average insurer per line of business and year in the highest quartile regarding the proportion of business under the mandate saves 5.4 percent of general expenses. Our results also suggest a fixed cost of adopting the technology, with larger cost-saving accruing to firms that adopt the new technology more widely.