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Coping With Upcoming Compliance Challenges

Bill Kenealy March 1, 2008

Just as carriers are using technology in novel ways to cope with existing regulations, other regs may be waiting around the corner.

Despite the insurance industry being more highly regulated than almost any other, compliance issues are more apt to elicit resigned murmurs than howls of protests from insurers. Much like gravity, regulatory compliance is widely acknowledged as an immutable fact of life, and people in the industry realize no matter how much they wish it otherwise, it is not going away.

“It’s an everyday thing,” says Kevin Christy, R&D manager at Edina, Minn.-based Western National Mutual Insurance Co., adding that the vagaries of insurance requirements in certain states can sometimes be onerous.

Yet, while recent years have seen new regulatory requirements from Sarbanes-Oxley Act to the Patriot Act impact the way companies operate, the use of technology is helping insurers mitigate some of the hassles.

When one considers the mountains of paperwork insurers were already working under, it’s fortunate for insurers that this new growth of regulatory requirements has coincided so neatly with the rise of the Internet as the medium of choice for electronic filing.

SERFF USE IS UP

One electronic interface that is making life easier for insurers is the System for Electronic Rate and Form Filing (SERFF), Christy says. SERFF’s intent was to provide a cost-effective, electronic method of handling insurance policy rate and form filings between regulators and insurance companies. Developed by the National Association of Insurance Commissioners, the concept for SERFF traces back to the early 1990s, yet is just now becoming widely used.

“It’s been around for awhile, but just recently some states began mandating its use,” Christy says. “It really took off last year.”

Christy says he generally is happy with SERFF, and is especially happy that he no longer has to wait for mail to be delivered. “The turnaround times are faster now,” he says. “It’s an improvement. We probably have more than 300 filings a year between rates and forms and new introductions.”

Yet, certain states require SERFF filings while others don’t.

“Some states have been slower to adopt and put the new technology in place, but I think they are all getting there—pretty much everything has gone electronic at this point,” says Debbi Marquette, director, compliance solutions for Whitehill Technologies Inc., which was recently acquired by Frisco, Texas-based Skywire Software, whose offering, Tracker, automates the state filing process and is integrated with SERFF. “SERFF has been a driving force behind that, making sure that companies are utilizing electronic distribution means to get filings to the states,” she says.

THE SOX ERA

While the road to SERFF adoption was drawn out and, until very recently, voluntary, insurers had no such luxury when complying to the reporting requirements of SOX.

“The compliance era kicked off with SOX,” says David Hurwitz, VP marketing of Islandia, N.Y.-based CA’s Business Service Optimization business unit. “Initially organizations just threw people at this. Part of that reason is that failure is not an option.”

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