Risk management is currently the strongest driver for compliance-related technology investments in the insurance industry, according to a new survey, "IT Innovation & Compliance," conducted by Strategy Meets Action in conjunction with Wolters Kluwer Financial Services.
More than 60 percent of the survey's 340 respondents–including business, IT, and compliance executives at insurance carriers–feel reducing risk within their organizations is one of the key business drivers triggering technology investments to improve compliance.
Inadequate systems was the second most cited factor, with more than 45 percent saying those systems are also influencing technology decisions. Insurance carriers with direct written premium of $250 million to $1 billion appear to be most burdened by inadequate systems, according to the survey.
Insurance executives believe the bulk of their technology investments focused on compliance today are geared toward the areas of regulatory change management, implementation of rate changes, and policy termination and conditional renewals, according to the survey.
Additionally, respondents report market conduct exams and regulatory content are areas they would like to see improvement, but they haven't begun those improvements yet.
When looking at the tools insurers are using today, more than 60 percent of respondents report they still track rate and form changes manually, which SMA analysts say illustrates a definite sign for improvement.
"These results really speak to the division found in many insurance companies between compliance functions and operations areas, particularly when it comes to the use of technology," says Karen Furtado, partner, Strategy Meets Action. "If carriers want to see an improvement in efficiency, risk mitigation and the overall application of technology, compliance executives must become more involved in the organization's overall IT direction and decisions."
The regulatory environment for insurance carriers continues to increase in complexity. During the first three quarters of 2010, more than 18,200 state and federal laws or regulations that affect the U.S. insurance industry were changed or created. This high level of change, coupled with diversity in requirements from one jurisdiction to another, presents substantial regulatory-driven challenges.
"Regulatory-driven business issues affect virtually every department across an insurance organization," says David Evans, vice president and general manager, Insurance Compliance Solutions, at Wolters Kluwer Financial Services. "This research helps convey a growing need for insurers to evaluate their compliance technology and resources to ensure they can continue to mitigate risk and meet regulatory obligations."
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