Insurance compliance professionals are well aware of the challenges presented by the regulatory environment in the US. The fact that there is a different set of laws and regulations that an insurer must comply with in each jurisdiction in which they do business (in addition to federal laws) means that ensuring overall compliance with all laws and regulations requires significant company resources. This challenge is further magnified by the fact that laws and regulations in each jurisdiction are constantly changing. In light of this, two important trends that I find interesting are; a general trend toward increasing regulatory activity year over year and a trend toward wider employment of technology solutions among insurers to assist in managing this complex environment.
As far as the trend toward increasing regulatory activity is concerned, the numbers speak for themselves. When looking at the total body of individual laws and regulations, DOI bulletins, attorney general opinions, and other related materials that directly impact the insurance industry across the US, the percentage of total records experiencing changes has increased steadily over the past three years. To this point in 2009, 10% of this total universe of content has experienced changes, compared to 8% in 2008 and 6% in 2006. In more detail, it is projected that almost 26,000 individual records in this universe will either change or be newly created in 2009, compared to about just over 20,000 in 2008 and just over 16,000 in 2007. These changes affect all lines of business equally, with about 30% of the total activity being comprised of general requirements that apply to all insurers regardless of line of business. Clearly, the trend is toward increasing activity and a heavier workload for compliance professionals to monitor and analyze.
Our research indicates that the trend toward wider employment of technology solutions by insurers to help manage the regulatory environment is driven by two primary needs. First, there is a common need to “do more with less” in a time of tightening budgets and, second, there is a need to realize efficiency gains in the process of managing regulatory activity by freeing up resources so that they can focus on more value added activities. Both of these needs can begin to be met through the implementation of technology that streamlines the management of regulatory activity.
Often, the process of managing regulatory activity is highly manual. Tasks like monitoring sources of regulatory information, determining which activity will impact company operations, summarizing that activity, distributing the information to the people who need to take action, and assembling reports on regulatory activity all require significant resource hours in order to be completed without some level of automation being introduced. In fact, our research shows that a mid-sized insurer operating in all but one US jurisdiction was able to realize a greater than 50% efficiency gain in completing some of these steps after investing in a technology solution for monitoring and management of the regulatory environment.
The bottom line is that, given the trend toward more regulatory activity in the coming years, insurers will need to explore and invest in ways to better manage the environment and minimize costs associated with non-compliance. The fact that substantial efficiency gains can also be realized as a result only increases the potential return on such an investment.
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NILS INcompass™ can help you be more efficient in the implementation of regulatory changes and gain visibility and accountability in maintaining compliance.
