Insurance is a highly regulated industry. That’s not surprising, given that our roots are in the banking and financial services industry. (People rarely appreciate a “move fast and break things” approach when their money’s involved.) Additionally, insurance is a business of contracts. That means lawyers, who look to the past – legal precedent – to guide future actions and decisions.
Of course, few of us get excited about the prospect of filling out forms and tracking deadlines. Insurtechs, in particular, often find regulations unnecessarily cumbersome to their novel approaches to insurance. It’s true that regulation generally lags behind technology. But that’s because it addresses the unintended consequences of innovation – consequences that often take a while to become apparent.
The Role of Regulators
It’s important to remember that regulators aren’t out to get insurers and producers. Their role is to protect consumers — people who often have limited experience with the intricacies of the insurance process. Regulators do this through two primary approaches: preventing fraud and promoting uniformity.
While some people do get dinged for regulatory technicalities, the vast majority of administrative orders target individuals and companies genuinely acting in bad faith. Left unchecked, these bad actors eventually undermine the trust consumers have in our industry. That hurts all of us!
Back in the days when I wrote policy and procedures manuals, I used to joke that they should all be subtitled, Things We Can’t Do Because Somebody Who’s No Longer Here Tried To. Most regulations exist because of past fraudulent activity. And it’s important to remember that state regulations usually represent the minimum standard for ethical and professional behavior. Producers committed to the best interests of their clients strive to exceed this standard.
Secondly, regulation helps consumers is by promoting a more uniform customer experience. This doesn’t mean that the rules kill innovation or force everyone to be alike. But if a customer is shopping for homeowner’s insurance, for example, they can feel confident that the different agents they speak to have at least a minimum level of familiarity with the products they sell and that the policy and rate they eventually select is within a competitive range. Again, producers and insurers who go beyond these basics to provide more consumer education and superior customer service will always stand out.
Regulatory standards benefit those in the insurance industry by creating a more level playing field. At least within a state, everyone starts at the same place. Cheaters are found and disciplined. Additionally, improved data sharing between regulators means that uniformity between states also is increasing. This enables companies from anywhere in the country to compete on a national level.
Regulators Want to Help
Regulators go beyond stopping abuses and promoting fairness. They can be invaluable resources for insurance professionals. Their websites contain a wealth of information about the insurance industry as well as regulatory compliance. Staff members also are available to answers questions. (If you can’t reach them by phone, try email.)
While our primary responsibility is to support the CDI by ensuring compliance and monitoring solvency, we take our responsibility to our members very seriously. Our staff is available by phone and email to answer questions about surplus line compliance, and we can schedule customized training. We also provide free continuing education (CE) courses to resident brokers and are working on expanding our program to benefit our non-resident members.Jo Ann Del Gatto, The Surplus Line Association of California
Even at an oops moment, regulators often can be surprisingly forgiving – as long as you reach out to them. So don’t think of them as the enemy. Instead, see them as invaluable accountability partners to help you survive and thrive in a competitive market.