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11:15 AM
Kathy Donovan, Wolters Kluwer Financial Services
Kathy Donovan, Wolters Kluwer Financial Services

Regulatory Change Management: A Considerable Challenge

The management challenges required to achieve compliance can be daunting, but technology can be an enabler.

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One of the key factors in effective compliance risk management is managing regulatory change — that dynamic, never-static environment in which the insurance industry operates. And, as the scope of responsibility surrounding this task continues to evolve, it is critical for insurance technology executives to understand how regulatory change management is affecting their business.

With more than 22,000 new or revised state and federal statutes, regulations and other regulatory agency documents directly impacting the insurance industry in 2010 alone, the management challenges required to achieve compliance can be daunting. With this in mind, it's easy to see why technology itself has become such an important tool. Regulatory change management may have traditionally been viewed as an area of concern relegated almost exclusively to the chief compliance officer within an organization, but it has long since transcended to include senior technology and other executives. Insurance technology executives are often involved in addressing and accommodating the needs of their organizations' regulatory compliance professionals.

While regulatory compliance professionals' needs to identify and comply with regulatory dictates may be simple enough to state, they are not so simple to solve. Careful consideration and understanding of this perpetual state of change can greatly assist in developing an insightful awareness of the challenges in determining the ideal management solution. Just as critical is the realization of the significant consequences that can result from a failed regulatory change management system, including market conduct fines, policyholder dissatisfaction, negative publicity and corrective action plans.

As regulatory changes occur, they can have immediate or very near term effective dates. Time is quite literally "of the essence" for regulatory compliance professionals trying to make sure they have identified the requirements and assessed their applicability to the organization. While problems certainly occur in the insurer's acquisition process of all the compliance requirements changes, all too often regulatory management system breakdowns happen when the notification of those changes are rolled out for implementation among the business units.

Opportunities for communication breakdowns in understanding the need for process changes, as well as what exactly needs to be done to ensure proper implementation, multiply with the sheer volume of regulatory activity. Underlying failures can sometimes be difficult to determine, but most can be prevented or mitigated if the technology systems contain visibility into the implementation process and validation steps that the appropriate changes are made. To the extent that an insurer's regulatory change management system can create consistent transparency, the organization is well on its way towards meeting its compliance challenges.

So as insurance company executives collectively assess system options and tools for managing and implementing regulatory changes, the focus ideally should be on functionality that includes:

  • Electronic delivery of accurate and timely regulatory source documents
  • Business impact analysis
  • Routing to the appropriate functional areas
  • Tracking and monitoring of change implementation
  • Validation that the regulatory changes were correctly implemented
  • Ongoing reporting to assure continued compliance and immediate corrective action in the event of de-implementation

These elements can serve as a roadmap to a robust and sustainable regulatory change management system. Taking a cue from the old adage "prevention is worth a pound of cure," senior insurance executives, including those in the areas of compliance and technology, can then confidently address the constancy we know as regulatory activity by preventing mismanagement of regulatory change.

Kathy Donovan is Senior Compliance Counsel for Wolters Kluwer Financial Services.

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