The future state of compliance in the insurance sector

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The future state of compliance in the insurance sector

Doing more with less in a changing regulatory environment

Over the last few years, the insurance sector has experienced more than before compliance incidents. As a result, compliance risk management has become a senior management priority. Insurance companies are looking for a strategic approach to compliance risk in order to improve the efficiency and effectiveness of the compliance function. What are the challenges in the field of compliance? Which developments are driving a necessary change in the compliance function? And how to prepare the compliance function for the future?

Internal and external pressure

The pressure is mounting on the compliance function of insurance companies, both internally and externally. Increasing regulatory mandates, perpetual talent squeezes, increasing demand for cost reductions, and a growing need for additional capacity for new and emerging risks are challenging them. This view is confirmed by the outcome of the compliance function benchmark.

Looking ahead | The future state of compliance in the insurance sector

Three key investment areas

Based on this benchmark, Deloitte has identified three key investment areas for the compliance function: digitisation & tooling, skills & talent and the compliance foundation. “Digitisation & tooling ” implies the use of data & tooling instead of manuallabour, so that resources can be used to achieve strategic goals. It requires re-engineering of core processes and automation of the function in order to be more proactive and predictive. In the field of “skills & talent”, there is a strong need for increased capacity and new competences. This trend is driven by a continuous increase in laws and regulations that impact the insurance sector, such as the upcoming sustainability regulation. To meet these expanding demands, the compliance function requires a more extensive skill set. And finally the “compliance foundation”. In recent years most insurance companies invested in making their compliance frameworks more effective as well as more efficient. However, there are still many opportunities for further improvement, especially the relation between the compliance framework and the broader (operational) risk frameworks. 

The time to act is now

The modern compliance function requires a more extensive skill set than before. Knowledge of new and emerging risks, data analytics and technological
innovations in the business are more important than ever. In light of the
challenges the compliance function is facing, the capability to leverage
technology for compliance tasks is key. The compliance function can reinvent
itself by investing in diversifying the function with the right people, and by
supporting this with adequate processes combined with new technologies. Then it will become a valued strategic partner to senior management with a clear vision. However, the time to start investing in the future of compliance is now. 

The future state of compliance in the insurance sector

For more detailed information, please read our Compliance function benchmark publication The future state of compliance in the insurance sector. The content of this publication is based on market experience and enhanced with the outcome of the compliance function benchmark. This benchmark was performed at five large insurance companies in the Netherlands in order to assess the current and upcoming challenges of managing compliance risk in insurance.

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