Although the typical reaction to new regulation is to view it as a hindrance, new rules that have emerged in the past few years that affect how customer information is used and shared should be seen as "an opportunity to distinguish yourself, not as a cost of doing business," according to Deborah M. Smallwood, insurance practice leader, TowerGroup. Speaking at Insurance & Technology's Customer Service Leadership Forum, which took place last week in New York City, Smallwood told attendees, "Customers have high expectations that insurance will help them manage their risks. They expect quality service at a competitive price, through various touchpoints." (TowerGroup was Insurance & Technology's program partner for the Customer Service Leadership Forum.)
Currently there are four key regulatory drivers affecting insurers and other financial institutions, Smallwood said. These are globalization; the current economic climate (including trends such as industry convergence, as well as the impact of accounting scandals and the ongoing slump in the financial markets); current technology trends such as the expansion of wireless/mobile capabilities, Web-based computing, and an increased focus on data security; and the "changing face" and expectations of the customer.
From a consumer perspective, this is translated into demands for "protection, privacy and trust," Smallwood said. And, accordingly, significant new regulation has emerged touching on all three imperatives. For example, heightened concerns post-9/11 for protection of assets, information and individuals spurred adoption of the USA PATRIOT Act and the Terrorism Risk Insurance Act of 2002; considerations about privacy, which got a wake-up call after the 1998 merger of Citicorp and Travelers, inspired not only the Financial Modernization Act of 1999 (Gramm-Leach-Bliley) but also HIPAA (Health Insurance Portability & Accountability Act); and reaction to the recent corporate accounting/financial scandals drove adoption of the Sarbanes-Oxley Act.
Smallwood stressed that responding to regulation such as these comprehensive acts is nothing new for the insurance industry, but added that the high profile of the current body of legislation, as well as the changing customer expectations, make the costs of non-compliance more severe than ever. That is why it is so important to take a strategic approach to compliance, she stated. "Product is no longer a differentiator for customers," Smallwood said. "Separating compliance from customer service is not an option."
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio