Technology will be a facilitator of change and compliance with new regulations. IT departments should ensure that the necessary process changes are technologically feasible, cost-effective and aligned with infrastructure capabilities.
Insurers should be ready to perform compliance oversight, monitoring and surveillance (like banks and investment managers, which use sophisticated compliance technology). To do this, they will need to:
-- Move from legacy, hard-coded systems to service-oriented architectures with agile and flexible core insurance processing systems that incorporate business rules engines.
-- Ensure existing applications and data inventories are accurate and complete.
-- Identify opportunities to simplify and rationalize the current IT environment (for example, legacy systems).
Transparent technology will be critical to governance, risk and compliance (IT-GRC) initiatives. It will help IT gain a clearer picture of the effects of changing regulation and facilitate cost-efficient change. Surveillance technology, which is unsophisticated at many insurers, will be essential to oversee the solicitation, sale, and pre- and post-sale suitability assessment of products.
Federal regulatory reporting will require consolidation of data across companies within the enterprise. With a systemic risk regulator, there will be a greater focus on understanding intracompany or intrabusiness unit risks for consolidated reporting purposes. To understand the risk spectrum in more-complex organizations, managing counterparty risk requires consolidation and analysis of numerous sources of information.
If insurers gain access to government-sponsored capital funding, there will be close oversight of funds use. IT will need to facilitate monitoring and reporting capabilities to ensure accuracy and efficiency of reporting.
Given the likely streamlining or elimination of rate regulation in federal regulation, service-oriented architecture with business rules engines should facilitate IT's role in enhancing product development and speed to market. Improved understanding of data architecture should be a driving factor in creating a single view of customers, thereby facilitating marketing channels for cross-selling multiple products and services.
The investment portfolio performance has been a key driver of and input into financial reporting. While investment management data governance is a challenge in financial reporting cycles, it is increasingly being used in a broader enterprise risk management (ERM) perspective.