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U.S. Insurers Face Competing Priorities: Compliance vs. Cybersecurity

Wolters Kluwer Financial Services’ Latest Regulatory & Risk Management Indicator Reveals Both to be Major Concerns for Insurers the Next 12 Months

Wolters Kluwer Financial Services today released the results of its  Regulatory & Risk Management Indicator for the U.S. insurance industry. The  Indicator found insurers over the next 12 months will face competing priorities for resources and time, with cybersecurity preparedness challenging overall regulatory compliance readiness. Sixty percent of insurance professionals surveyed said cybersecurity will receive escalated priority at their organization, followed by regulatory risk at 42 percent.

However, more than 60 percent of insurance professionals are concerned about their organization’s ability to stay informed of changing laws (62 percent) and maintaining compliance with changing regulations (61 percent). The Indicator Score, the measure of regulatory complexity and the compliance and risk management challenges facing insurers, dipped slightly below its baseline of 100 this year to 97 amid a heightened regulatory environment. This score is the result of steady regulatory activity and enforcement actions, a decline in the overall amount of fines issued, along with reduced investment in compliance staff and technologies over the last 12 months.   

Based on the survey’s results, senior insurance executives understand the compliance challenges facing their organizations. More than 70 percent said they are concerned about their organization’s ability to track and meet the compliance standards of changing regulations. But surprisingly, only 26 percent of insurance professionals said their organization had made investments in compliance staff in the last 12 months. Twenty-seven percent said their organization had made investments in compliance technology for the same time period.

“In the last year, regulatory changes have increased 14 percent and enforcement actions remained steady at over 800,” said Kathy Donovan, senior compliance counsel at Wolters Kluwer Financial Services. “There was a decline in assessed financial penalties during the same period. But overall regulatory activity remains high and insurers need to continue investing in their governance, risk and compliance programs to strengthen their compliance efforts.”

The silver lining for the insurance industry is that less than half (48 percent) of insurance professionals are concerned about their ability to invest in new compliance technologies. The majority of insurance professionals believe they have access to the budget required to address their compliance concerns.

“Maintaining compliance in today’s complex regulatory environment requires a continuous investment in compliance staff and technologies,” said Donovan. “Compliance management, like cybersecurity, is a cyclical process. Once a cybersecurity threat is resolved, another threat emerges. Today’s regulatory environment is also continually evolving and requires proactive diligence and planning to stay ahead of new requirements and mitigate negative outcomes from market regulation actions.”

To learn more about the  Indicator, please stop by Wolters Kluwer Financial Services’ booth 13 & 14 at the Association of Insurance Compliance Professionals’ (AICP) 28thAnnual Conference, Oct. 11-14, 2015. Additionally, the Regulatory & Risk Management Indicator report for the U.S. insurance industry is available  here

About Wolters Kluwer Financial Services’ Regulatory & Risk Management Indicator

Wolters Kluwer Financial Services’  Regulatory & Risk Management Indicator for the U.S. insurance industry tracks 10 factors across two consecutive 12 month periods to illustrate the overall level of regulatory and risk management pressures facing U.S. insurers. The Indicator Score is a measure of the regulatory complexity and the compliance and risk management challenges facing insurers. The Score is calculated based on a 12 month comparison of the 10 factors from September 2014 to August 2015 and September 2013 to August 2014. The  Regulatory & Risk Management Indicator report was developed from surveys of more than 300 insurance professionals completed in September 2015 and 2014.  

About Wolters Kluwer Financial Services

Wolters Kluwer Financial Services provides customers worldwide with risk management, compliance, finance and audit solutions that help them successfully navigate regulatory complexity, optimize risk and financial performance, and manage data to support critical decisions. With more than 30 offices in 20 countries, our prominent  brands include:  AppOne®AuthenticWeb™Bankers Systems®,  Capital ChangesCASH Suite™GainsKeeper®NILS®OneSumX®TeamMate®Uniform Forms™VMP® Mortgage Solutions and  Wiz®. Wolters Kluwer Financial Services is part of  Wolters Kluwer, which had 2014 annual revenues of €3.7 billion ($4.9 billion), employs 19,000 employees worldwide, and maintains operations in over 170 countries across Europe, North America, Asia Pacific, and Latin America. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.