2020 was a rough year. And while 2021 is brighter, the hard insurance market is here to stay. Worse, regulators are turning an increasingly critical eye to the industry in light of shifts in work patterns and risk.
The good news? The insurance industry is in the midst of a tech revolution to become more customer-centric, digitally empowered, and efficient. But first, you have to navigate insurance regulations successfully.
That's where a claims consultant can help your company thrive.
Upcoming Focus Areas for Insurance Regulations
2020 was a red-letter year, and not in a good way. 2021 continues to carry some of the major changes seen in 2020 into the new insurance environment. In many ways, the regulatory environment of 2021 is directly shaped by 2020, and you can see it in the regulatory focus areas:
- Digital transformation
- Workforce transformation
- Operational resilience
- Financial resilience
- Shifts in state regulation
- Climate risk
Workforce transformation, for example, is an obvious outgrowth of remote work trends arising from the coronavirus pandemic. This also means that operational resilience has a different cast. Operational resilience now means building the infrastructure to account for remote teams, and remote teams, in turn, introduce different risks that insurers must account for.
Then there's the practical side—48% of insurance executives pointed to COVID-19 as evidence that they were woefully unprepared to weather economic storms, while only 25% agreed that they had a clear action plan for financial resilience.
Insurance regulators learned that lesson too. Worse, they learned it while discovering that the COVID-19 crisis brought on a cyber pandemic.
Here's the thing: as an insurer, you know that the field isn't static. The policyholder experience is significantly shaped by what happens in the world and what the field focuses on. But one way or another, your policyholders expect the same excellent experience.
Here are a few major focus areas for insurance regulations this year.
Thanks to the rising security challenges of the new work environment—especially as workers remain online working via unsecured computers—data governance is increasingly prevalent for insurance regulators.
Data governance is simply a principled approach to managing the data lifecycle. It includes things like data management policies, but on a larger scale, it ensures that you treat data as an asset aligned with your organizational objectives. It's your first line of defence for data compliance.
It should come as no surprise, then, that regulators are cracking down.
At a minimum, insurance companies are expected to demonstrate robust data governance policies. On a deeper level, though, you have to demonstrate what you're doing to put those policies into action.
Monitoring Data Collection and Refreshing Data Inventories
As an insurer, you collect massive quantities of personal and confidential data on your customers in order to provide the best possible customer experience and coverage. Here's the problem: if you don't manage that collection as a complete life cycle, you'll leave your data vulnerable.
This is the point where your data governance policies are put to use. Insurers need to inspect the complete life cycle of their data, from cradle (initial collection) all the way to grave (deletion). For example, you need to review points where third-party vendors can access your data.
Regulators also want to see insurers review data classification. For example, if you have existing data classifications, part of your compliance process is a routine check to ensure your classifications are still useful and relevant and, as a consequence, are still being used.
Ensuring Operational and Financial Resilience
Unfortunately, while many companies may have thought they were prepared for a major storm, COVID-19 proved them wrong. And in the meantime, operations continue to transform as insurance companies continue to rely on outside vendors to parse their data and provide cost-effective alternatives to infrastructure investment.
The problem is that COVID-19 proved how fragile many companies truly are. In tandem with rising compliance requirements in response to long-term work-from-home arrangements, companies must demonstrate their resilience with increasingly robust programs.
How Claims Consulting Helps You Navigate Insurance Sector Regulations
This brings us to the meeting place of claims consulting and insurance sector regulations.
Typically, companies outsource claims consulting for a few reasons. They want better business outcomes. They want cost-effective resourcing support. They want carrier expertise. They want high-quality claims performance. Maybe they want all of the above.
Either way, claims consulting is essential to navigating regulatory changes.
For one thing, the right claims consultation service allows for greater agility and versatility. They make it easy to adapt to changes in your organization and your larger industry over time. All you need to do is add or remove services. And since you no longer manage those services in-house, scaling services is that much easier.
For another, relying on professional consultation services gives you a partner in risk management, with a clearly (contractually) articulated understanding of data governance expectations. The right partner is your strategic match, someone who approaches data handling and security using the same or similar best practices that you use.
Plus, keep in mind that professional consultation services have to be just as up-to-date on regulations as you do. Otherwise, they would never be able to provide a successful service.
They can also make your whole data governance life cycle that much easier, no matter how regulations may change. In fact, compliance is one of the main areas where insurance companies outsource.
The Professional Consultation Services You Need to Thrive
Claims management is the pass/fail litmus test for the whole insurance industry, and that includes insurance regulations.
So if you need a partner that will help you overcome your biggest challenges and make strategic moves toward the future, Gallagher Bassett is here to help you deliver on your promises to your customers, just like we've been doing for the last 50 years. Get in touch today to learn how we can help your organization drive transformation.