Compliance should be top-of-mind for insurers not just in 2023 but all the time because it is always top-of-mind for regulators. According to the most recent NAIC Insurance Department Resource Report, there are roughly 6,000 domestic insurers in the United States, and in 2021, there were 1,474 financial and market conduct exams conducted by state insurance departments. That means nearly 25% of all carriers were subject to an exam with states collecting nearly $208 million in fines and penalties.

The high cost of non-compliance

The insurance industry as a whole is behind the curve in terms of the modernization of its compliance processes. Frequently, compliance is erroneously viewed as a cost center, with the insurer's focus on how to reduce expenses rather than on optimizing the function. In some cases, this means foregoing a software or vendor upgrade that can improve compliance. Sometimes the decisions that make the balance sheet look good are not the best for compliance, and generally, insurers do not budget for fines and regulatory penalties.