Relentless cost pressures on insurance carriers, and the lack of holistic compliance solutions available until recently, have created ongoing demand for "point solutions" that resolve compliance challenges inexpensively. The results, however, tend to be unsatisfying because point solutions offer less value over the long-term than comprehensive ones which are integrated enterprise-wide. As carriers take an increasingly enlightened approach to managing their compliance activities, the demand for holistic solutions should increase. Determining whether a point or holistic solution is appropriate requires preparation, collaboration and deliberation among top and senior management and their teams to ensure that a particular compliance solution offers maximum benefit organization-wide.
The best holistic solutions should perform automated monitoring and reporting. They should also maintain a "warehouse" of compliance information that is accessible across divisions within the company.
Holistic solutions offer many advantages. Foremost among them is their ability to deliver a "big picture view" of compliance risk within the organization by providing a single set of tools to support compliance activities. Holistic solutions, if developed and implemented successfully, can eliminate the need to integrate existing software platforms with new ones. They also enable a carrier to interact with one solutions provider instead of multiple vendors when making modifications to their systems and processes, or when engaging technical support.
Furthermore, holistic solutions centralize information, making it easier for users to access the content. They are also configured most easily to the needs of a specific organization and provide a foundation for addressing changes to laws or regulations affecting carriers. The common interface across applications makes it easier for employees to use and results in greater accuracy of reporting and easier analysis of critical data.
[Previously from Shafran: The Regulatory Tech on Insurers' Agendas]
The potential drawback is they are often in reality bundled point solutions that have been branded as holistic ones. To avoid acquiring software that over-promises and under-performs, management and IT professionals should use their collective expertise to determine, before it's too late, whether a holistic solution will add value or create a patchwork of problems. Building a "performance clause" into the sales agreement, as well as speaking to the provider's clients about how the solution has worked for them, gives the provider incentive to set reasonable expectations for the carrier.
The Point Solution Alternative
In contrast to holistic solutions, point solutions can meet challenges relatively inexpensively because they are narrower in scope than their holistic counterparts.
Besides requiring a relatively modest commitment of resources in the short-term, point solutions can be customized and implemented quickly due to the small numbers of functions they are designed to perform.
Ease of implementation, however, can be offset by difficulties of having information divided into process and data silos, which can produce inefficiencies and increase the cost of doing business. Likewise, the need to maintain multiple data sources which often operate on different platforms can be cumbersome and expensive.
From a strategic perspective, point solutions offer a partial view of the compliance environment, which can hinder effective decision-making. Such solutions also offer little flexibility with regard to future development.
The use of multiple non-integrated systems can be an obstacle to enterprise-wide adoption of viewpoints and procedures. If employees aren't using solutions because of their perceived or actual shortcomings, the company's investments in those software programs can lose their value quickly, forcing management to "upgrade" more quickly than it anticipated having to do so.
Whether a holistic or point solution makes sense for a particular carrier depends on multiple factors. Most significant is the extent to which top and senior management regard compliance as a strategic or tactical function. If management regards compliance as a strategic function, it can be helpful to make a decision tree or flow chart which includes these questions:
• To which laws and regulations is the business subjected?
• To what extent is the entire organization in compliance with those rules?
• Can the organization prove compliance to a third party, such as a regulator, investor or board of directors?
Regardless of whether a carrier is implementing a holistic or point solution, the solutions provider should offer ROI projections based on criteria to which provider and client agree upfront. This step enables the carrier to set reasonable expectations and determine how much value the solution adds to the organization. Higher costs in short-term often lead to bigger savings over the long-term
The decision on which type of solution to implement should reflect organization-wide input rather than be the unilateral choice of a person or group. Before and during the selection process, and throughout implementation, top and senior management should take full ownership of compliance solutions rather than "leave it up to IT."
With few exceptions, a holistic approach to compliance enables insurers to best manage their portfolio of compliance risks.
About the author: Jerry Shafran is CEO and founder of Compliance Assurance Corporation, a provider of insurance compliance technology including regulatory change management, consumer complaint management, regulatory filing, market conduct exam management, and policy and procedure management.