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Managing Regulatory Changes
June 24, 2011
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Regulatory Change Management
• Critical Component of successful overall regulatory compliance risk management program;
• When tasks associated with this issue are completed effectively the level of compliance risk is severely mitigated
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External Factors/Drivers
• Enterprise “Risk Management” Focus– AM Best– Credit Agencies– Market Conduct Exams
• Regulatory Compliance Risk Management is a component piece
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The Current State – Regulatory Change Management
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Challenges
• Regulatory Activity Volume• Monitoring and Filtering • Lack of Visibility• Miscommunication • Insufficient Accountability• Significant Manual Processing Involved
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High Volume of Regulatory Activity
YTD Citation Activity
5309 - Amends 2741 - New 778 – Repeals
Total= 8828 Source: NILS INsource
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Monitoring & Filtering
• Monitoring multiple sources– Industry trade associations, state
websites, third party providers, etc.• Capturing all relevant material is a
must• Filtering all activity down to only
those items that impact company operations
• Manual process – Significant time spent sorting
through multiple sources; very inefficient
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Seeing only part of the picture
• No visibility across organization• Required by multiple roles • Process difficult to control
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Communication is Challenging
• Involves many departments and roles• Often inefficient & time consuming• Multiple communication methods
– Phone– Voice Mail– Email– Paper – Hallway Conversations
• Misinformation increases non-compliance risks
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He Said She Said
• Lack of Accountability• Decentralized Processes • Business Silo’s• Lack of Visibility• Independent Control
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Manual Process
• Independent Process• Independent Use of Available Tools • Lack of Visibility• Lack of or Limited Communication• Time/Cost of Resources High
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Now we know the challenges…..
……..How is the industry doing?
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Organizational Assessment• Are we locating all legislative and regulatory developments that
pertain to our business?• Are we doing it in the most efficient manner?• Are we consistent, accurate and timely when we analyze new
regulatory activity for impact to our organization?• Are we notifying the right people about regulatory changes that
affect their business responsibilities? • Are we providing our business areas with the information they
need to effectively determine impact and develop plans for changes?
• Do we monitor our process?• Do we support efforts by our business areas to correctly
implement regulatory changes?• Do we verify that regulatory changes are implemented correctly
and on time – and that they stay in place?• Are we reporting on key business metrics of our regulatory
change management effectiveness?
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6 Vital Areas of Effectiveness
• Acquire• Analyze• Distribute• Monitor • Verify• Report
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Regulatory Change Management Performance Effectiveness
84.3
66.760.7
52.4
42.9
17.9
0
10
20
30
40
50
60
70
80
90
Acquire Analyze Distribute Monitor Verify Report
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Costs
1. Workflow/Processing Resource Costs
2. Compliance/Operational Costs
3. Hidden Costs
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Workflow Processing Costs
• Costs in terms of resources, of all the tasks throughout the process that require some level of manual interaction
– Obtain source material– Monitor and filter regulatory content– Gather, assemble, and distribute information– Communicate across the organization – Research of past implementations
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Compliance / Operational Costs
• Costs incurred as a direct result of instances of non-compliance when implementation projects are left incomplete or regulatory activity is missed altogether
– Market conduct examination costs & fines– Re-examination fines– Operational costs to implement/re-implement– Customer remediation costs
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Hidden Costs
• Costs incurred as an indirect results of non-compliance, such as lost business due to a high-profile non-compliance event
– Future lost business – Brand devaluation– Increased future market conduct activity
costs– Opportunity costs associated with “fire drill”
implementation projects
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Cumulative Impact on Costs
Millions of dollars, including the risk of going out of business
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Ideal Solution – Key Elements
1. Gain Operational Efficiencies
2. Accountability Built Into Process
3. Robust Reporting
4. Ease of Use
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Operational Efficiencies
• Automated Delivery of Content• Powerful Filtering of Incoming Content (LOB,
State, etc.)• High Quality Summaries• Fully Automated Communication
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Accountability Built into Process
– Link tasks directly with individuals– Track the progress of each task against a
goal• Milestone Dates
– Automated Reminders– Escalation Process
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Robust Reporting
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Ease of Use
– Flexible to Manage Different Types of Projects
– High Degree of Configurability– Short Learning Curve/Quick Adoption
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Effectively Managing Regulatory Change
• Understand the true scope of insurance regulatory content
• Know the potential consequences of noncompliance• Identify the tools that the business needs to
successfully manage and leverage regulatory content
• Review and report on activity across the organization
• Audit activities for accuracy and compliance
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Thank You.
Dawn Barker
National Product SpecialistInsurance Compliance SolutionsWolters Kluwer Financial Services
Dawn.Barker@WoltersKluwer.com877-268-7511www.Insurance.WoltersKluwerFS.com