With all the reports about how much insurers plan to spend on technology in 2011, little has been written about the impetus behind the decision. For carriers focused on compliance with regulatory bodies (which comprises the bulk of insurers), the strongest incentive for technology investments is risk management.
More than 60% of 340 respondents in a survey reported “reducing risk” within their organizations is one of the key business drivers triggering technology investments to improve compliance. The survey, “IT Innovation & Compliance,” was conducted recently by Strategy Meets Action in conjunction with Wolters Kluwer Financial Services, targeted business, information technology and compliance executives at insurance carriers.
“Inadequate systems” was the second most cited factor, with more than 45% saying those systems are also influencing technology decisions. Insurance carriers with direct written premium of $250 million to $1 billion appear to be most burdened by inadequate systems, according to the survey.
Insurance executives say the bulk of their technology investments focused on compliance today are geared toward the areas of regulatory change management, implementation of rate changes, and policy termination and conditional renewals. Additionally, respondents say there are other areas where they would like their organizations to improve results, such as market conduct exams and regulatory content and claims, but they haven’t begun implementation of those improvements yet.
Regarding the tools in use today by insurers, more than 60% of respondents say they still track rate and form changes manually, which SMA analysts say illustrates a definite sign for improvement.
“These results really speak to the division found in many insurance companies between compliance functions and operations areas, particularly when it comes to the use of technology,” said Karen Furtado, partner, Strategy Meets Action. “If carriers want to see an improvement in efficiency, risk mitigation and the overall application of technology, compliance executives must become more involved in the organization’s overall IT direction and decisions.”
The regulatory environment for insurance carriers continues to increase in complexity. During the first three quarters of 2010, more than 18,200 state and federal laws or regulations that affect the U.S. insurance industry were changed or created. This high level of change, coupled with diversity in requirements from one jurisdiction to another, presents substantial regulatory-driven challenges.
“Regulatory-driven business issues affect virtually every department across an insurance organization,” said David Evans, VP and general manager, Insurance Compliance Solutions, at Wolters Kluwer Financial Services. “This research helps convey a growing need for insurers to evaluate their compliance technology and resources to ensure they can continue to mitigate risk and meet regulatory obligations.”
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access