IT Called Vital For Insurer Disclosure

LAS VEGAS–Information technology managers are playing a higher-profile role in meeting regulators' calls for more insurance company data, said a panel of industry experts here at the ACORD LOMA Insurance Systems Forum.

Speakers at the session on “Why IT Leaders Need To Care About Regulatory Compliance” discussed the increasing reliance of carriers on quality data as they maintain compliance with the myriad of state and federal regulations governing different aspects of the industry.

Among the more prominent, and expensive, regulatory structures to stir debate within companies are the costs of compliance with the Sarbanes-Oxley Act, which was enacted to increase the accountability of senior company officers in financial reporting to regulatory agencies.

On average, according to Jim McIntyre, a director with Deloitte & Touche, companies are spending approximately $1 million on SOX compliance per $41 billion in revenue, and the issue has stirred a “loud debate.”

Given the enormous amount of funding being put into SOX compliance, Mr. McIntyre said it is more important that IT professionals ensure the information they provide for reporting is accurate, or else it will add to what he called the “perception that we are not in step with where the business is going.”

The problem is that SOX regulations are still being clarified, he noted, although auditors are starting to establish what information is important and what is considered a “luxury.” Despite this knowledge of “must have versus like to have,” however, he said compliance costs are likely to continue to rise.

Michael Rigby, a vice president and actuary for MetLife, argued that concern over the costs of SOX compliance may be important, but companies should also consider the costs of noncompliance, such as class action lawsuits and the loss of prestige with consumers.

Mr. Rigby explained that IT can also help with other areas of regulatory compliance vital to a company's operations.

MetLife, he said, has established a data warehouse to track its information and aid in compliance with such bodies as the Office of Foreign Assets Control, which enforces sanctions imposed by the government against countries, organizations and individuals deemed an enemy of the United States.

The company is able to re-check information that registers as a “false positive” to avoid the types of mistaken-identity situations occurring in airports, Mr. Rigby said.

IT also plays a significant role in the more mundane aspects of compliance for insurers, said Dan Durej, a second vice president for St. Paul Travelers in charge of agency administration.

Mr. Durej said the process of keeping track of agents, their licenses and appointments would be impossible without sound information technology.

“I can't do it without you,” he told the IT audience, “and I can tell you that no other company can do it without you.”

Solely on the property-casualty side, he said that St. Paul Travelers maintains 48 legal entities in over 50 jurisdictions. The company has over 15,000 contracted agencies, 100,000 producers, and files over 700,000 appointments and terminations annually. The cost of such operations is significant, he said, noting that St. Paul Travelers will spend over $430 million this year just to keep its agents appointed.

“We need to keep this data in sync,” he said. “If we don't, we're simply not in compliance.”

The penalties for not being in compliance can be severe, he said, noting that a carrier operating in Maryland faces a $10,000 fine for failing to keep an accurate license number and appointment date for one of their agents, while failing to notify Colorado regulators of an agency termination-with-cause within 30 days could cost a carrier its license to do business.

IT is also a necessity for bringing a product to market, Mr. Durej explained, solely to help a company establish which agents should sell a product and ensure they have the necessary licenses and appointments. Such a job, he explained, would be impossible without IT.

Tech support also helps with statistical reporting to state regulators, noted Sandi Perillo, a technical analyst for The Hartford. Maintaining the quality of such data is crucial, she noted, and can also play a role as a company examines itself–for example, checking if a particular product is profitable.

Overall, Ms. Perillo advised that IT professionals should learn a little more about the operations and information they are managing, which will help foster increased communication between IT and the insurance operations within a company.

“Work with the business, understand the business' needs,” she said.