Deloitte Consulting's Jim Evans says compliance is an opportunity, not a threat.
Compliance is often seen as a hurdle, which insurers need to overcome. But insurers can ill afford to bury their heads in the sand. This issue is an opportunity not a threat.
The FSA requirements for insurance selling should be seen as a key business driver and not an irritating afterthought. Compliance with FSA's regulations is integral to the commercial success of insurance companies.
Insurance companies need to be ready for the introduction in October 2004 of the regulations for selling general insurance. With this in mind, what are the first steps towards fully compliant insurance provision?
First, the ability to design sales processes that integrate compliance requirements will be paramount. Aside from the processes, it will be important to engender a culture of compliance to crystallise this way of working amongst the workforce. Also, ensuring staff meet the competency requirements to do the job will be critical to the maintenance of business regulations.
The development of compliance will also bring greater transparency to the products being sold. Drawing on management information will allow insurers to build a catalogue of persistency ratios. Building this information into directors', managers' and staff key performance indicators (KPI's) will drive sales. However in this situation it is important to evaluate whether quality is being sacrificed at the cost of sales targets.
Technology will also be critical to maintain regulatory standards. Automated processes reduce compliance risks. However, some financial companies have struggled with `compliance' systems that have failed to deliver. It is therefore necessary to ensure any IT solution is fully integrated between the back and front-end. Links with product systems are an important consideration since the FSA is concerned not only with how the sale is carried out, but also the administration issues surrounding each transaction. Back office systems must uphold robust procedures to manage client claims effectively and to deal with situations when things go wrong and if complaints occur.
Now is the time to carefully consider the next step forward into the new regulated general insurance environment. Compliance with the FSA requirements represents far more than just a short-term challenge. It is a key business issue, which demands effective planning and careful preparation. Focus on staff practices and IT solutions will be crucial when the FSA assess insurers' compliance arrangements.
As we progress into 2003 only those insurers that heed FSA requirements will reap the benefits.
