Insurance Compliance 2023: Lessons from the Past and Predictions for the Future

You probably don’t need us to tell you that compliance within the insurance industry is an incredibly complex, nuanced undertaking. Most regulations come from the state (or territory) level versus the federal government. This means every industry participant – from the largest insurance carrier to a lone independent agent – is potentially subject to over 50 different sets of rules. If you work in the industry, you know firsthand the challenges that come along with this system. 

For too long, staying compliant with insurance rules and regulations has only been possible through manual, time-intensive, and error-prone tasks. Even with the help of technology, many insurance compliance professionals find themselves toggling between multiple tabs, windows, or systems to piece together the information they need. And, once they’ve got it, they manually enter it into another place (or two, or three). 

It’s now indisputable that the future of insurance compliance management (like nearly everything else in the world) is digital. With the start of a new year, we wanted to take stock of the past, current, and future states of insurance compliance, even going so far as to cast some predictions for what’s going to matter most in compliance moving forward. 

Long-term insurance compliance challenges 

We know there’s no shortage of people in this industry who are passionate about insurance compliance. But, historically, their jobs haven’t been easy. We can point to three central challenges that have plagued compliance professionals since the beginning of time. 

1. Manual processes

If you go back far enough, handwritten applications and paper mail were the norm in every industry. For insurance compliance, this norm stuck around a bit longer than anyone would like. Even with an upgrade to digital tools like desktop computers and email, many insurance professionals still find themselves performing processes manually as they toggle between different types of documents (PDFs, spreadsheets), multiple web browser tabs, different computer programs, and, yes, even paper documents. 

The lesson: Just because it’s electronic doesn’t mean it’s modern. 

2. Time-consuming tasks

Manual processes aren’t known for being quick and effortless. We hear from compliance professionals across the country how much time they’re spending on things like:

• Verifying producer license statuses on a state-by-state and LOB-by-LOB basis
• Completing carrier contracts on behalf of their producer force
• Running reports of upcoming renewals to make sure each producer completes their continuing education credits before the deadline

Just to name a few! Large insurance carriers may have an entire department devoted to compliance, but how much of that teams’ time is spent on work that isn’t high-value and revenue-generating? For small organizations like independent agencies, they may only have one person to perform all their compliance tasks, and this person is overworked, burned out, and the keeper of all institutional knowledge. 

The lesson: Large or small, your compliance staff could be doing more impactful work – or even get a vacation! 

3. Error-prone work

The saying “to err is human” is no less true when it comes to compliance. You can minimize human error, but you never fully eliminate it. And the more people who are involved in your processes and tasks, the greater the chances for human error. 

With so many moving parts, it’s easy to see how things can get overlooked. Unfortunately, in insurance, a seemingly small mistake could result in producers selling out of compliance, which can mean serious penalties for insurers, agencies, and producers themselves. 

Selling policies isn’t the only time you need to be concerned about checking all the compliance boxes. Many other points along the insurance distribution channel, from adding policy endorsements to carrier commission payouts, depend on producers being properly licensed to remain legally compliant. 

The lesson: Insurance is filled with opportunities to unintentionally fall out of compliance.

Insurtech is a new partner in solving age-old challenges

Are you tired of the word “disruption” yet? We definitely are! This past year has brought a much-needed shift in the way insurance technology companies are viewing themselves in relation to legacy insurers and agencies. We’ve seen a transition from the idea that the industry needs to be turned on its head by technological innovations, to the premise that technology can enable insurance professionals to do what they’re best at while lightening the load on everything else. In other words, today’s insurtechs (the smart ones at least) view themselves as viable business partners here to ease the pain points of a historically successful industry. 

In 2023 and beyond, the most valuable insurtechs will help insurance carriers, agencies, individual producers, and adjusters reduce the amount of time they spend on manual and repetitive tasks. With technology doing the heavy lifting, talented people will have the bandwidth to focus on the parts of the job only humans can do – whether it’s revenue generating, client relationship building, or creatively innovating. 

Compliance trends to watch for in 2023 and beyond 

Here are four of the most significant compliance trends we think you’ll see more of in the coming year. Certainly, at AgentSync, we’ve already begun to see these play out among our customers. 

1. Compliance as a differentiator with agents and producers

As the insurance industry faces a talent shortage above and beyond what other sectors face, carriers, agencies, and everyone in between need to consider how their processes and technology will help or harm their attempts to bring on new talent. Producers, agents, brokers, regardless of what name they go by, are the lifeblood of the industry as they build trust with clients and sell much-needed insurance products. 

We predict (and, in fact we’ve already witnessed) that organizations that make it as quick and effortless as possible for producers to get onboarded and stay in compliance throughout the lifecycle of their licenses, will be partners of choice for the hundreds of thousands of insurance producers working today and in the future. This is particularly true as younger, digital-native generations discover insurance as a career. These new producers want an “Amazon” experience, not an antiquated one. 

2. Compliance as a differentiator with insurance carrier partners

Just like the ease of staying in compliance will help agencies attract and retain producers, insurance carriers are starting to see the value of partnering with agencies that prioritize compliance at every step of their business. 

Insurance carriers carry a large burden for the compliance of each agency they contract with, all the way down to each agent appointed to sell their products. And no carrier wants to take on more risk than they have to. It’s not surprising then that they’ll prefer to do business (and more of it) with downstream partners with a heavy emphasis on maintaining a compliant organization. 

When agencies implement solutions that make compliance a no-brainer, it reduces the risk a carrier will have an agent selling their product out of compliance or that they’ll pay a commission to a producer who isn’t properly licensed. 

3. Modern compliance management as a cost-mitigation strategy 

As inflation remains high, insurance markets harden, and borrowing money becomes more expensive, insurance carriers and agencies need to reduce unnecessary spending. This may seem like the wrong time to expect them to invest in new solutions when they could keep doing things “the way they’ve always done it.” But in fact, the cost of doing nothing is higher than most people realize. 

Automating compliance management saves back-end and operational costs. It lets you do more with your current headcount, or do even more without increasing payroll. It enables growth (i.e. more agents, more carrier partners, more geographic markets, more insurance products) without multiplying the amount of compliance-related work their staff have to keep on top of. 

When you view it that way, it’s no wonder that more and more organizations across the insurance distribution channel will be adopting advanced and automatic compliance management as a way to reduce operational costs while enabling growth on their revenue teams. 

Baked-in compliance as a risk-reduction strategy

All the fancy technology in the world doesn’t matter if someone still has to worry about whether or not the tech is enforcing the right compliance rules for the right people at the right times. If that’s the case, you’re hardly doing better than just employing more people whose sole job is to check and double check license compliance status. 

This is why we predict a rise in the adoption of insurance compliance solutions that truly and fully automate compliance from one end of the distribution channel to the other. Solutions that include baking regulatory changes into the system as soon as they happen will become highly integral to risk-reduction strategies. When compliance is built-in and automatic, it removes the risk, the questions, the “what ifs” that some tech solutions leave on the table. In a world that keeps getting riskier, carriers, agencies, MGAs/MGUs, and other insurance entities will increasingly understand the value of having “set it and forget it” compliance solutions in place. 

Insurance compliance isn’t optional. Neither is insurtech. 

As we move towards completing the first quarter of the 21st century, it doesn’t take a crystal ball to predict that insurance industry regulations will continue to be complex and ever-changing, while technology will strive to stay a step ahead. 

No matter how your business is managing producer license compliance at the moment, it’s doing one of two things. Either it’s dragging your business down, taking up time, frustrating staff, costing money, and risking regulatory non-compliance. Or it’s fast, smooth, automatic, helping you grow cost effectively, and ensuring compliance is a key ingredient throughout. The choice is yours!  

Whichever approach you choose, our prediction for 2023 is that those who take the path of tech-forward, automated compliance will be better poised to capture market share even in a hardened environment.

To join the growing cohort of businesses that are removing manual compliance management from their list of to-dos in 2023, schedule a demo today.