The Compliance Evolution

For far too long, compliance teams in insurance companies have struggled with executing day-to-day activities because reactive issues take up too much of their time, time that could be used toward developing forward-looking risk mitigation.

Chief compliance officers of insurance companies have felt the pressure of increase regulatory mandates, perpetual talent squeezes, growing demand for increased cost reductions, and emerging risks and regulations that are challenging their team’s ability to succeed.

In a study conducted by Thomson Reuters, one-third of the firms surveyed said that they would spend at least an entire day each week keeping track of the changing regulations. In addition, 69% of respondents said that they expect regulators to propose additional rules in the coming year. The study also revealed that the lack of coordination between internal functions is causing firms to miss opportunities to leverage resources.

The speed and shear breadth of regulatory change remains to be a constant challenge for firms. As the business needs evolve and become more complex, it becomes even more difficult for compliance teams to keep up. It is critical that the compliance function changes its focus from hindsight to foresight to mitigate further risks. Compliance modernization will impact the way the function is governed; the tools, technology, and analytics it uses; and the way it connects with other parts of the business.

The many internal and external factors that are impacting the insurance compliance model are interdependent and have overlapping impacts and implications. Thus, any changes that would occur to the traditional compliance model would require a holistic approach, where all members of the organizations are prepared for the future. The functions that will face the greatest impact from a modern compliance program are actuarial, financial, risk management, and IT. The modernization of a compliance program in the insurance industry requires that these key functional areas work together to create a process that will be responsive to both internal and external stakeholder needs and demands.

The demands on businesses and compliance programs are more complex than ever, so doing nothing is no longer an option. Consider the following key forces that are driving the transformation:

  • Regulators are strengthening and increasing their control overall within the industry
  • Customers are looking for products that have new features and innovative services
  • Shareholders are searching for low risk investments with stable returns to protect their capital
  • Technology is reshaping the business model but exposes the company to new risks

 Compliance teams have to rethink their compliance models to become proactive instead of reactive. This will require investment in technology, adoption of improved processes, and deliberate focus on what the business, risk, and operation functions can contribute to the development of more predictive insights.

Drivers for Modernizing Compliance

The pressure to make a change comes from many directions, including:

  • Internal Challenges can include a lack of executive buy-in; ineffective coordination across multiple business units; a lack of compliance strategic vision; and/or ineffective use of technology.
  • Emerging Technologies can include regulatory technology such as cognitive compliance and governance, risk, and compliance automation; and/or big data analytics such as predictive analytics, and the increased use of high-volume data to drive risk identification and process enhancement.
  • Regulatory Pressure can include new regulatory requirements; increased regulatory examinations and inspections; increased enforcement actions, fines and penalties; and/or heightened standards and expectations.

Attributes of a Modernized Compliance Programs

The aim of any basic compliance program will always be to mitigate risk and comply with the regulations that are specific to your line of business. A modern compliance program goes beyond the basic objective and works with new technologies, tools, and practices to generate measurable value for the compliance function.

In order to make this happen, an organizations compliance strategy should be integrated and aligned with the overall business strategy.

What are the attributes of a modernized compliance program?

  • Being proactive instead of reactive: Compliance is an ongoing process, so testing and monitoring is critical – don’t waste time doing it manually, automate it. Automating your processes will save you time and resources, enabling you to focus on other areas such as developing forward-looking risk management practices.
  • Align Compliance Risk Management strategy & business strategy: Compliance is a company-wide objective, the Compliance Risk Management strategy should be embedded across all business functions to drive value and provide greater insight into its effectiveness.
  • Enhanced regulatory change management coverage and processes: Through the use of artificial intelligence and natural language processing, there are now tools that are able to help compliance teams reduce time spent on keeping up with changing regulations by monitoring global authoritative services for relevant content and automatically updating a repository of current regulatory content.

Outcomes of a Modernized Compliance Program

To drive efficiency and effectiveness, compliance and regulatory functions need to be better aligned with the business strategy. Modern compliance organizations are efficient, risk-intelligent groups that deliver through business enablement and partnerships.

Here are 6 Outcomes of a Modernized Compliance Program:

  1. Transformative Change: Modern organizations will re-evaluate core processes and automate the function to be more proactive and predictive.
  2. Flexibility: Modern compliance programs will be able to rapidly scale up or down, and ready to respond to any changes to the business or regulatory landscape.
  3. Increase to Capacity: Through the use of new technology and upgraded tools, teams will be able to take on more without compromising quality of work.
  4. New Competencies: Compliance professionals are able to connect to new business partners and advisors.
  5. Cost Reduction: Cost reduction opportunities exist through the use of tools, technology, and resource allocation to effectively manage increased capacity of work.
  6. Enterprise-wide view of risk and compliance: Working in tandem across all business units to ensure compliance.

For a top-tier insurance provider, a modern compliance program is the only way that they can properly address issues of non-compliance in a proactive and predictive manner. The program needs to be able to cut costs, empower highly skilled resources, and bring value to the shareholders and business – this is how you can measure the success of the compliance program. As most insurance providers are still in the early stages of modernization, it is critical that the initiative shares the same end-state vision of the program across all business units. While the journey to address these necessary changes will be long, the organizations who can successfully transform their compliance programs will gain a significant competitive advantage over those who do not.

To learn more about how organizations can harness the power of technology to achieve a modern compliance program, watch our on-demand webinar How to Master Compliance with Next-Gen Technology or download a copy of our pre-recorded RCM Product Demo.

In this on-demand webinar, Blueprint CTO, Tony Higgins, is joined by David Paris, Head of UK and Ireland Financial Services at Cognizant, to talk about how the most effective technologies to help financial services organizations create innovative solutions to address the continuous changes in the regulatory landscape and achieve compliance.


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