With expanded regulations going into effect in many industries, including insurance, organizations must not only show that they have compliance and ethics programs in place, but also be able to demonstrate that their programs are working. The regulatory scrutiny of such programs is shifting from a focus on policies, procedures, and retrospective audits to proactive measures of effectiveness and desired results. Many insurance companies now seek to implement measurements that will help them prove that employees understand the importance of compliance and ethics in the workplace.
The U.S. Securities and Exchange Commission (SEC) has established a framework for evaluating cooperation in determining non-compliance and how to charge violations of the federal securities laws. This framework includes the potential for reduced sanctions for organizations that have established “effective compliance procedures.” There are several resources available for insurers as they strive to assess their compliance programs and demonstrate that they are indeed working. The most commonly cited resource is the list of seven elements of effective compliance and ethics programs that was revised in 2010 by the United States Sentencing Commission (USSC) at the same time the U.S. Federal Sentencing Guidelines were modified. These provisions set forth the attributes of savvy compliance and ethics programs. (Refer to “A Blueprint for Compliance” on pg. 38 for more information about the sentencing guidelines.)
Producing proper evidence is typically the greatest challenge for any company looking to demonstrate the effectiveness of its compliance program. This requires a determination of what the evidence needs to be, how the company will monitor it, and how often to update it so the compliance officer can say at any point, “Here is the evidence of what we have in place now, and here is evidence of the system that we had in place during the time period in question.”
4. Communicate and educate employees on compliance and ethics programs. The organization must take reasonable steps to communicate its standards, procedures, and other aspects of its programs periodically and in a practical manner throughout all levels.