Maintaining compliance with changing regulations is the top concern of U.S. insurers, and three quarters of P&C, life and health insurers surveyed said they are significantly concerned about market conduct exams, according to “U.S. Insurance Regulatory and Risk Management Indicator,” from Wolters Kluwer Financial Services, a risk management, compliance, finance and audit company.
The top risks, as indicated by 300 survey participants include: regulatory risk, as per 53 percent; IT risk, 34 percent; operational risk, 31 percent’ market risk, 26 percent; fraud, 24 percent.
The top regulatory concerns, those rated as seven or greater on a 10-point scale, include: market conduct exams, as indicated by 75 percent of participants, compared to 66 percent in Q4 2013; privacy and data protection, 68 percent, compared to 55 percent in Q4 2013; electronic business transactions 66 percent, up from 58 percent; state rate/form filing requirements, 65 percent, up from 58 percent; consumer complaint compliance, 59 percent, up from 58 percent in Q4 2013. Twenty-eight percent said they have an adequate strategic enterprise risk management program, according to the report.
The “U.S. Insurance Regulatory and Risk Management Indicator,” measures 10 factors to offer a “pain indicator,” the company said, seven of which revolve around direct input from life, health and property/insurers on their top compliance and risk management concerns and three of which are based on regulatory data the company compiles.
The main indicator score fell to 96 from 100, the baseline established in Q4 2013, Wolters Kluwer said. Concern remained stable overall, but each of the industry metrics used to calculate the indicator declined, resulting in an overall slightly lower rating.
Concern over compliance and risk declined slightly, compared to Q4 2013, Wolters Kluwer said for: maintaining compliance with changing regulations, as per 62 percent of participants, compared to 66 percent last quarter; keeping track of changing regulations, as per 59 percent, compared to 63 percent last quarter; demonstrating compliance to regulators, 58 percent, compared to 60 percent last quarter; managing risk across all lines of business, 39 percent, compared to 44 percent last quarter.
“The steady levels of concern illustrated by the indicator data provides us with a look into the challenges to U.S. insurance carriers heading into to most active time of year for regulatory enforcement actions,” said Pam Ewing, general manager of Wolters Kluwer Financial Services’ insurance compliance solutions. “Moreover, the indicator suggests that organizations face a very real challenge not only to stay abreast of rapid regulatory changes but in establishing processes and, importantly, in developing an understanding of the true risk picture.”
The top obstacles to managing risks include: too many technological systems that are not integrated,’ which increased to 37 percent, compared to 30 percent last quarter; regulatory pressures’ increased to 20 percent from 15 percent; lack of transparency into risk management decisions’ was unchanged at 15 percent.
“As the effective date for Own Risk Solvency Assessment requirements draws closer, the strategic enterprise risk management programs at these carriers are going to be tested,” Wolters Kluwer said. “This survey data points to potential vulnerabilities in the risk management framework at these organizations.”
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