Last week, the Obama administration outlined its plans for post-meltdown financial regulatory reform in an 85-page framework that’s supposed to address a snarled regulatory structure that evolved in response to the financial panic of the moment. While most of the content addresses issues that are well known throughout the banking and financial markets industry, U.S. insurers didn’t escape the attention of the feds.
Short of calling for a federal charter, the framework instead proposes the creation of an Office of National Insurance (ONI) that will fall under the auspices of the U.S Treasury Department. The report outlined six principles of proposed insurance regulation that addressed systemic risk, capital standards, consumer protection, affiliate organizations, international coordination, but especially increased national uniformity through either a federal charter or effective action by the state. This last principle, in particular, could have big impact on insurer spending on overall regulatory compliance.
Every year, Forrester asks insurers about the priority of key information technology business themes, including the definition of risk and compliance strategies. This year, 35% of insurers surveyed stated that regulatory compliance was a critical or high priority, down from the nearly 58% who reported similar priorities in 2008. This year, insurers at 35% were also significantly less than all U.S. industries combined (45%) and U.S. banks (53%), which clearly understood that if they thought they were regulated before the financial crisis, they hadn’t seen anything yet.
If the ONI can deliver on the promise of greater uniformity of regulation among the states, insurers can likely reduce the priority of and spending for regulatory compliance in their IT planning processes, and instead devote those dollars and resources to the stuff that attracts and keeps customers such as product innovations, more effective channel interactions, including customer-facing mobile applications, and tighter linkages with the all-important agent/broker distribution network.Tell us what you think: Will ONI offer some relief on U.S. insurer compliance costs?
Chad Mitchell is speaking this week at Forrester’s Customer Experience Forum in New York City, and will return with his blog next week.Ellen Carney is a senior analyst with Forrester Research. She focuses on how the financial services industry researches, procures and deploys business technology, and is responsible for developing the global forecasts for IT budget and spending forecasts for insurance and banking. She can be reached at firstname.lastname@example.org.
The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.
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