Insurers' Top Compliance Priorities: Dealing With State Regulations, Preventing Data Breaches

The fifth anniversary of the global financial crisis is looming, and the regulatory complexity that has ensued in response to the crisis shows no sign of abating. So it's no surprise that respondents to SAI Global Compliance's most recent Insurance Industry Compliance Benchmark Study reported that complying with increasingly complex state and federal regulations, preventing data breaches and demonstrating compliance effectiveness were the top compliance program priorities this year.

According to SAI, a provider of governance, risk and compliance (GRC) products, services and technology, more than one-third of the nearly 200 insurance compliance professionals across the life insurance, property & casualty, annuities, accident & disability and workers' compensation segments who participated in the study indicated that their firms were increasing compliance budgets in order to achieve the following goals:

Keep Up With State Regulations: 77% of respondents indicated "Compliance with State Regulations" to be a top compliance priority. This was up from 63% in 2012, SAI says.

Comply with Federal Regulations: Programs stemming from the Dodd-Frank Act, the Financial Stability Oversight Council (FSOC) and the National Association of Insurance Commissioner's (NAIC) Solvency Modernization Initiative (SMI) call for increased monitoring of the insurance industry, SAI notes. Accordingly, "Compliance with Federal Regulations" was listed as a top priority for 55% of participants (an increase from 41% of respondents in the 2012 survey).

Prevent the Next Headline-Making Data Breach: "After witnessing countless companies experience brand and financial damages due to data and privacy breaches, insurance organizations have significantly increased their efforts to prevent such things from happening," SAI says in a summary of the findings. Thirty-nine percent of participants listed "Prevention of Data Breaches" as a top priority for 2013, compared to 20% last year.

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SAI contends that these pressures are motivating insurance companies to proactively ensure their compliance programs actually work -- rather than waiting for audits or other incidents. As evidence, , the solutions provider reports 71% of respondents said that "Demonstrating Compliance Effectiveness" was a top or high priority this year.

Among the SAI study's other findings:

• 25% of participants said their organizations used "Internal Audits/Assessment Results" to document and demonstrate compliance program effectiveness. Other options were "Ad Hoc or Qualitative Measures" (18%), "Quantitative Measures" (14%) and "External Audit Results" (14%).
• 62% of respondents said they are highly confident in their methods to demonstrate compliance effectiveness, up from 4% in 2012.
• Many participants indicated an increase in program elements in which they could demonstrate compliance effectiveness this year, SAI reports -- most notably, "Policies, Procedures and Controls," which increased from 70% to 85%, and "Code of Conduct," which grew from 78% to 84%. Fewer than half the respondents said they could demonstrate effectiveness in the areas of "Due Diligence to Avoid Delegation of Authority to Unethical Individuals" and "Consistent Enforcement and Discipline of Violations," according to SAI.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio