While listening to a recent KALEIDOSCOPE Podcast, one idea shared by Wayne Smith and Ross Slater really resonated with me. They explained that the financial and insurance professionals they work with are tired of talking about resiliency. Agencies want more than just survival; they want to grow!
Certainly, we’ve had some rough years recently; and many analysts have legitimate concerns about an impending economic downturn. That doesn’t mean postponing plans to grow your insurance business, however. Instead, it’s time to pivot from being reactive to being proactive in order to take advantage of opportunities. So, here are four areas that ILSA is watching in 2023 (and how they can impact your regulatory compliance needs).
Information & Technology
Technology is no longer a disruptor for the insurance industry; it’s an essential tool for every professional. As Paul Carroll recently pointed out, however, many companies talk a good game about digital transformation while putting off implementation. His article references carriers, but this same reluctance appears at every level of the insurance ecosystem.
Of course, embracing technology does bring risks as well as rewards. First, as our industry turns to automation to bridge talent gaps and provide the rapid response that consumers expect, it’s essential to build compliance with regulatory requirements into these tools. Developers also need to monitor the learning process for artificial intelligence systems to ensure that long-standing biases don’t perpetuate themselves and prevent producers and carriers from acting ethically and in the best interests of consumers.
Second, insurance professionals need to evolve beyond collecting and aggregating vast stores of data. They must find ways to develop actionable insights that benefit consumers and our industry. Increased data utilization, however, inevitably incurs certain cybersecurity risks and raises new privacy concerns. As more states implement laws specifically targeting our industry, insurance professionals – especially those in leadership roles – must develop greater expertise in this area.
Finally, as automation plays a growing role in delivering insurance services, we have an opportunity to develop true knowledge workers. It’s essential to remember, however, that as team members’ roles evolve, their licensing and compliance needs may change as well.
Staffing & Management
The shift from skills-based to knowledge-based work isn’t the only trend impacting talent recruitment and retention. Post-pandemic, workers in every industry and of every age are looking for more than just a paycheck. This is particularly true for insurance, which traditionally attracts individuals interested in helping others while advancing their own careers.
Insiders have long sought ways to rebrand insurance as an exciting career for the 21st century. One way to do so is by shifting from the reactive “insurance” model to a more proactive “risk management” approach. This strategy offers more satisfaction for both consumers and insurance professionals, while simultaneously helping to reduce costs and losses. It also dovetails neatly with the proactive mindset that drives effective regulatory compliance.
Second, businesses at every level of the insurance ecosystem need to recognize and respond to the needs of an increasingly diverse workforce. A “one-size-fits-most” approach to agency management no longer works. Industry newcomers typically take time to adjust to our highly regulated environment, so managers need to make a special effort to explain not only the how but the why of insurance laws and regulatory procedures. Additionally, leaders need to prepare themselves for the challenge of managing remote and hybrid workers – both in terms of productivity and compliance – as the novelty of work-from-home wears off.
The Changing Insurance Market
Many insurance professionals are currently experiencing their first hard market. In response to this shift, our industry is likely to see a proliferation of distribution channels for insurance products. Solutions such as usage-based insurance, parametric insurance, and embedded insurance are gaining widespread acceptance as both supplements for “traditional” insurance products or as replacements for them.
Such channels often challenge the status quo for insurance regulation. They can also make individuals whose primary focus is elsewhere an integral part of the insurance sales and underwriting process. Creating scalable compliance solutions for these new colleagues is essential to strike a balance between buyers’ expectations for ease of access and the need for robust consumer protection, including fraud prevention.
One thing that hasn’t changed is our industry’s affinity for growth and diversification through mergers and acquisitions. M&A activity shows little sign of decreasing throughout the insurance ecosystem, although some continue to have concerns about the influence of private equity in such transactions. Both buyers and sellers need to focus on regulatory compliance needs as well as P&L statements to structure and execute successful deals.
As the scope of insurance risks as well as the costs to administer programs continue to grow, robust operational design takes on greater importance. The reactive, patchwork “evolutionary” approach to developing standards and procedures is no longer effective. Leaders need to take an intentional approach to determining needs and identifying solutions that can grow with the business. They also need to factor an ever-increasing pace of change into their planning and implementation strategies.
Outsourcing, long distrusted in the financial services sector, is finally gaining acceptance. Our industry now embraces a wide range of specialty providers – MGAs, proto-MGAs, TPAs, and specialty agencies, in addition to consultants and third-party service providers – to meet its evolving needs. These entities have their own special compliance requirements and procedures that strategic partners need to understand and support.
A Final Thought for the New Year
People are longing for enthusiasm, confidence, and hope. Insurance professionals are uniquely positioned to nurture this positive outlook in the individuals and communities we serve. By adopting a forward-thinking approach, we become more than “good hands” standing by to help policyholders in a crisis. We become advisors, providing the expertise needed to grow wealth to be invested in a multitude of bright futures.
Here’s wishing you and yours a safe, healthy, and prosperous 2023!
From insurance licensing, corporate compliance, and surplus lines tax filings to business process management, operations optimization, and more, the ReSource Pro family of companies offers customized solutions that help you grow your insurance business.
Visit us at ilsainc.com to discuss your needs with a compliance consultant.