Insurance Networking News recently interviewed Debbi Marquette on the topic of regulatory compliance. Marquette is a former insurance company compliance officer with 25 years of experience. Currently, she is director of compliance solutions at InSystems, a Markham, Ont., provider of document management and compliance software.INN: What are the most crucial issues in compliance today?
DM: Insurers need to develop and file new products faster while eliminating regulatory slip-ups. They have to make sure that their processes reduce regulatory risk. No one wants their company to be penalized by an insurance department and become the next mini-Enron.
But risk management has gotten more challenging as competitive pressures are forcing insurers to get more new products out the door faster. A study by a leading advisory firm concludes that products representing more than 70% of today's sales will be obsolete by 2010. When asked, 86% of property/casualty carriers and 96% of life/health carriers surveyed said it was somewhat important or very important for their company to improve and speed up product development.
INN: Are many insurers using technology to boost speed to market and reduce risk?
DM: More and more are, but many haven't caught on yet. They think they're automated because they're sending drafts of new product around by e-mail. There's a lot of paper floating around, with tons of paper comments. Someone has to manually compile all this. That's not real automation. With this kind of manual process, it's easy to lose sight of the final version, and that happens more often than you might think. An insurer files an incorrect version of a product or endorsement because something got lost in the process. If it has to re-file, that both hurts the company's credibility with regulators and delays the product introduction.
INN: How can technology streamline compliance review for new products and enhancements?
DM: Technology has to accommodate a collaborative review process that involves marketing, claims, legal and IT specialists. Tracking all this without special tools, especially when state variants are involved, is unwieldy, time-consuming and error-prone. Technology that provides sophisticated document management, workflow management and accountability tracking speeds the process and ensures that the product that gets filed is the one that all parties have approved.
INN: How does that work?
DM: Document management software provides a single place for all reviewers to input their comments and thoughts. The system automatically routes the latest draft to everyone, while storing all previous drafts for reference. Everyone works from a single current document.
The same software also provides workflow management. A point and click distributes drafts to a predefined distribution list. Besides ensuring that all drafts get proper signoffs, the process management capability also eliminates bottlenecks.
INN: Can automation eliminate much of the grunt work involved in filing products with state regulators?
DM: Absolutely--particularly when you're talking about multi-state filings. Filing can't be handled efficiently with word processing and e-mail because filing new products with up to 55 jurisdictions-the 50 states, District of Columbia and overseas territories-demands specialized tools. Each jurisdiction has different forms and filing requirements. Keeping up with this manually is a pain in the neck and mistake-prone. You end up with drawers full of forms that are often outdated as soon as you store them. Specialized software can maintain this content so that compliance departments don't have to do the detailed work of keeping track.
INN: Does NAIC's System for Electronic Rate and Form Filings (SERFF) streamline filing?
DM: Yes, but it automates only one activity, distribution. There is still manual preparation of the filing components in order to utilize SERFF. With SERFF you can submit files electronically instead of using the post office or a delivery service. But if you're filing a product with multiple states, it is very time consuming to use. A filing system that's integrated with SERFF to automate the filing preparation makes SERFF quicker and more effective by letting you file in multiple states at once, incorporating state variants as needed. This can cut the time needed for countrywide filings by 60% to 70%.
INN: What are the risk management implications?
DM: Sarbanes-Oxley requires publicly held companies to put risk management practices into effect, but privately held insurers and mutuals may be required to take similar steps. Getting products filed correctly and on time in multiple states is half the battle. The other half is keeping track of what each department of insurance has done with your filing. Without a specialized database to keep track of all this, it can be an overwhelming job for an insurer that's filing many products in multiple states.
One common problem is that the IT people, who understandably want to get ahead of the curve, start programming a new product before it's been approved and is ready to issue. You can imagine the regulatory problems this causes if changes are later required to secure approval, but no one knows to go back and re-program. Good tracking technology prevents that.
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