Insurers must prioritize compliance: Here’s why.
Ignoring compliance due dates or disregarding inaccurate/expired licenses can be financially damaging for insurers.
Compliance must remain a top priority for insurers not only in 2023 but always. The most recent NAIC Insurance Department Resource Report states that out of the 6,000 domestic insurers in the US, 1,474 financial and market conduct exams were carried out by state insurance departments this year – roughly 25% of all carriers! As such, regulators collected over $208 million worth of fines and penalties from these firms. To ensure you are always fully compliant with regulations it’s crucial that compliance stays at the forefront of your mind.
The crippling cost of neglecting to comply
The insurance industry lags when it comes to modernizing compliance processes. All too often, companies view compliance as an expense instead of an opportunity to optimize and improve their functions. This means they may forego software or vendor upgrades that could enhance their compliance efforts to cut costs on the balance sheet – despite not budgeting for fines or other regulatory penalties.
The insurance industry is currently facing a massive issue with non-compliance. Far too often, insurers lean on manual practices that are vulnerable to error or depend upon sporadic events such as license renewals and appointments to initiate compliance checks – usually occurring every two years. Clearly, there is no assurance of long-term monitoring and the corresponding tools required for enhanced compliance when this system is utilized.
Let’s look at the potential risk of policyholders not verifying licensure upon renewal. If an insurer does not have systems in place to verify their producer’s license status, it can lead to inaccuracies and perhaps fines during market conduct exams; even if there was no malicious intent or negligence involved on either side. The example here is of one such instance where a producer let his license lapse without being noticed by the insurer until it was too late.
Insurers often ask how much it will cost them to comply and how they can maximize the efficiency of their compliance spending. Generally, insurers figure that the total expense for things like staff, technology, and transactions associated with meeting regulations is known as the total cost of compliance. These expenditures are usually allocated in advance or under some type of control by the insurer.
Nonetheless, frequently overlooked are the costs of penalties and fines due to non-adherence. These expenses were not planned for and reflect how serious an insurer is about compliance.
A frequent inquiry is whether insurers are doing enough to keep up with current and upcoming regulations. The insurers seem to think they are putting forth the utmost effort, but vendors have a contrasting viewpoint-they witness too many approaches at carriers that could potentially fall short due to them being manual or because certain personnel hinder progress if they depart or switch roles in their departments.
So, how can insurers combat complex regulations? The simplest solution is to work with experienced providers who are already familiar with the complexities. It’s common for insurance companies to believe that their individual difficulties require distinct changes and approaches when all insurers must comply with the same standards. Sure, there are still difficult requirements but often those complications come from within the organizations themselves.
Though hundreds of insurers continue to demand license copies from producers, the upload and storage of these documents is not an obligatory regulatory requirement. Insurers are highly encouraged to take advantage of NIPR’s Producer Database for their verification needs as it is updated daily by state insurance departments – this ensures accuracy far greater than the printed license copy that reflects a single moment in time.
With the help of software, businesses can maximize their efficiency by streamlining compliance processes from onboarding producers, and license verification to appointing. Moreover, apart from a documented audit trail for all activities conducted in the program which ensures that no crucial details are neglected when it comes to any compliance task – having an established workflow also guarantees your business is always compliant.
With numerous legacy solutions to manage compliance, insurance providers often find themselves struggling with complex logins and processes for a single purpose. Thankfully, the software can be used to enhance efficiency within the organization, ultimately reducing costs associated with compliance. Streamlining these procedures brings about many benefits that help an insurer remain profitable and productive.
Furthermore, technology can provide an abundance of ways to guarantee that compliance data remains up to date. Any reliable compliance solution should directly integrate with the producer registrar, allowing for daily updates from state insurance departments regarding producers’ licenses and appointments; thereby ensuring that your insurer’s conformity records align accurately with the states’.
In today’s world, technology has drastically altered the compliance business. Fortunately for insurers, this shift presents an outstanding opportunity to move towards efficient solutions that provide tremendous benefits. By concentrating on these perks and making a paradigm switch from traditional tactics, insurers can more effectively manage costs while avoiding costly fines – all resulting in increased efficiency with a clearer view of their operations.