Costs for IT resources focused on complying with regulations are rising for property/casualty insurers, and many carriers cannot even keep up to date with circulars from the Insurance Services Offices, a new survey reveals.
Insurity Inc., a provider of core insurance processing software and services, on Tuesday announced results of a survey underwritten by the company that uncovered the challenges midsize property/casualty insurers face as they continue to drive operational excellence and regulatory compliance.
The study, published as part of the Novarica Research Partners Program, focused on midsize insurers (annual premiums generally between $100 million and $1 billion) that write commercial lines of business and utilize ISO in some fashion.
Survey respondents indicated regulatory compliance is mandatory and a high priority, with the majority of insurers placing it in the top three strategic priorities for their company.
“The report does a great job of confirming that regulatory compliance is a strategic priority for insurers. We’ve seen this in our customer base,” commented Jeffrey Glazer, CEO of Insurity.
“We’ve been helping our customers with regulatory compliance since our start, and in recent years it has become an even larger topic due to the increase in large regulatory changes. We have created a Regulatory Advisory Committee, comprised of our customers and members of our team,…that proactively addresses the software issues related to regulatory compliance and allows us to update our software in light of new regulatory rules and information,” Glazer added.
Other survey result highlights include:
- Insurers see themselves as capable of handling data calls and stat reporting—the critical day-to-day practices—but they have a tougher time when it comes to keeping products up to date and verifying that workflows and processes are compliant.
- The chief challenge in managing regulatory compliance is connected to the complexity of the evolving regulatory environment, making it difficult to do analysis and interpretation in a timely manner while also managing the sheer volume of required documentation.
- Carriers spend significant IT resources on regulatory compliance. The majority of respondents expect the cost of compliance to increase in 2014 due to more regulator scrutiny around data and reporting.
- Usage rates and currency of ISO are strategic choices. Most insurers are substantially ISO for most lines of business, but only 20 percent are current. A majority have filings that are two to five years behind, while 20 percent are five or more years behind.
“When senior insurer executives talk about their strategic goals for their company, they often refer to speed-to-market, agility and the ability to rapidly respond to market changes. But regulatory compliance—a critical capability for an insurer—is also increasingly seen as a key strategic priority, not just a tactical process required to keep the lights on,”said Karlyn Carnahan, CPCU, principal with Novarica and co-author of the survey report. “An insurer that is able to rapidly and accurately respond to regulatory demands is also typically an insurer that is nimble at reacting to market demands as well,” Carnahan said in a statement about the survey.
“For many midsize P/C insurers that rely on ISO to some extent, managing the analysis and interpretation of the circulars, as well as reporting, adds to the compliance load,” Carnahan continued. “The cost of handling compliance-related activities is a significant portion of an insurer’s IT budget, and carriers expect the costs and the level of regulatory demands to increase in the coming year.”
Source: Insurity Inc.