Filed Under:Claims, Education & Training

Ethics and Compliance in the Workplace

Demonstrate Your Program’s Worth

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.

Great Expectations

Building a Program

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.)

Preparing for an Audit

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.”

3. Exercise due diligence to avoid delegation of authority to unethical individuals. Organizations must use reasonable efforts to avoid delegating substantial authority to individuals with a history of engaging in illegal activities or other behavior that would defy the tenets of a program. Many organizations are increasingly outsourcing a variety of operations to third parties. Outsourcing functions that are beyond an organization’s core strengths makes good business sense. However, organizations must also use proper safeguards to ensure they are dealing with reputable and ethical partners, as they cannot outsource their liability along with operational functions.

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.

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