Take the Cost Out of Compliance at Your Insurance Carrier

Insurance carriers of all sizes struggle to walk the compliance tightrope: 

• Compliance isn’t optional, but to do it right you need significant dedicated resources on staff – whether that’s headcount, staff time, or technological systems. 
• To do it quickly is nearly impossible. 
• To do it at scale without an exponential increase in your compliance staff (and payroll costs) is challenging. 

The costs may come in the form of additional people dedicated solely to compliance at larger organizations, inefficiencies and wasted manual effort on an already-overworked staff at smaller organizations, and the cost of maintaining and working with legacy systems that aren’t pulling their weight across the board. 

As the economy faces high inflation and a potential recession, insurers have to look at places to cut costs as much as any other business. 

You want to stay on the right side of all applicable laws and regulations, but you can’t just remove compliance from your operations or cut back on it as a function. So the question becomes, how do you do more with less? The answer is to automate compliance in such a way that your in-house experts are freed up to do meaningful work they want to be doing while the nitty-gritty tasks of keeping up with ever-changing regulations are baked into your workflows. 

Why is insurance carrier compliance expensive? 

Insurance carriers face a large compliance burden. Just as few examples: 

• Every downstream agency and individual producer or agent has to be properly licensed in their resident state, and any other state in which they sell, for each line of business – and states differ in whether they require licensure at the agency level, the agent level, or both.
• Every downstream agency and individual producer or agent has to be appointed with your carrier to sell each product they sell.
• Licenses and appointments have to be valid not just at the time a producer makes a sale, but at other points in the process, such as when you pay out commissions. 

To track each of these points – and more – for every distribution channel partner (agencies, MGAs, individual producers, etc.) is a time-consuming and manual process. Many carriers are still relying on their compliance team to aggregate spreadsheets, static PDF documents, and various state websites to monitor compliance. When you multiply this complexity by the number of agencies or other intermediaries you work with, and the number of individual producers selling your products, there’s nothing quick, easy, or low-cost about it! 

Someone at your company has to understand the nuances of insurance regulations across states and lines of authority, then keep up with ever-changing regulatory requirements. This role requires significant tenure and expertise within your team and has typically meant insurance carriers need dedicated, specialized staff for this purpose. 

Finding and keeping dedicated compliance staff becomes a challenge in an industry already facing a talent shortage and a mass retirement wave. Attracting and retaining people whose main purpose is to cross reference spreadsheets, PDFs, and state departments of insurance websites is a losing proposition in 2023. 

Even if finding people to do the job isn’t your issue, if you’ve got people doing the labor-intensive work of manually tracking producer compliance, that’s headcount on your payroll who aren’t generating revenue. They’re not even doing revenue-supporting work like customer service. 

The work they do is extremely important and legally required. But they’re spending entirely too much time on compliance monitoring, compliance management, and license verification – all of which could be automated with better results for everyone. 

How much is manual compliance management costing you? 

Probably more than you realize. You have to consider costs both in terms of dollars and cents, and in other less tangible ways, like wasted time, regulatory risks, and staff attrition. 

The cost of wasted human time and effort

How many humans does your insurance company need to manage your producer licensing and compliance? For each of those administrative employees, you’ve got to pay for salary, benefits, taxes, (potentially) office space, equipment, and many other hard costs. 

If it’s not entire positions dedicated to manually managing compliance, you might have members of your legal, compliance, operations, or other teams who could be doing more valuable work if they weren’t spending a significant portion of their time on compliance-related tasks. Regardless of whether it’s entire roles dedicated to something they don’t have to be, or people spending what should be valuable revenue-generating time on administrative tasks, wasted human effort is a huge compliance cost. 

And for all that cost, what you get in return are people doing things that could be automated and done in way less time. Think about what those people could be doing with that time, or possibly their entire role, to serve customers, build customer relationships, expand your services into new markets, and much more. If only they weren’t dedicated full time to manually tracking producer compliance. 

The cost of recruiting and retaining employees 

Employees these days have more choice over where and how they work than ever before. If your organization isn’t putting systems in place that make your employees’ jobs easier, less tedious, and more efficient, then you’re going to lose out on the best talent to companies that are. 

The cost of replacing an employee is estimated to be anywhere from $1,500 on the low end for an hourly employee to over 200 percent of their salary for C-level executives. When your company doesn’t implement modern technology to make your employee experience truly exceptional, you risk losing everyone from the operations staff, compliance managers, and claims representatives working in-house all the way to downstream agency partners who may find your processes too time consuming to deal with. 

No one likes repetitive tasks with a high probability for errors. But, if everyone in your organization is subject to old fashioned processes that reinforce information silos, multiple and conflicting sources of information, and mind-numbing repetition, the odds of attracting and retaining the best talent are slim. 

The cost of stagnant growth

Your growth goals might include partnering with new agencies or MGAs to ramp up sales of a particular product or expanding into a specific geographic region. They might also include bringing on a large new cohort of captive agents dedicated to your products. You might be looking to introduce brand new products into your current markets that require your current producer partners to get licensed in an additional line of authority. 

These are great strategies for growth, but how many more compliance staff members, or hours spent on compliance tasks, will you need to do this without risking landing in regulatory hot water? And how much will that cost? With the cost of labor still high, the cost of claims ever-climbing, and a question mark over your revenue for the foreseeable future, you might run into a growth roadblock if you can’t scale because you can’t invest in enough compliance resources to support these goals. 

The cost of risk

Managing producer licensing and compliance on paper, with spreadsheets, or by any other manual and human-based method is full of risks. 

The more complex your compliance picture, the more risk is involved. What seems reasonable for a relatively small, regional insurance carrier with 50 producers working in one or two states, selling a single type of product, quickly becomes a minefield of risks if the company onboards new agency partners across the U.S. or introduces new lines of business. 

Don’t forget about the additional complications that get thrown into the mix when you talk about commission hierarchy structures across all your downstream agencies and agents. You know it’s risky to pay out commissions without checking producer license compliance in real-time at that moment, but how can you possibly keep up with those compliance checks when you’re adding new producers and growing quickly?  

If you don’t go into these types of expansions with compliance at the forefront of your mind, you could end up in a regulatory quagmire when you start to grow. Or, if your organization is already large, you could be deep in compliance quicksand already.  

When you consider the risks of doing things the way you’ve always done them, consider each of these elements: 

Compliance risks: What are the chances that a producer selling your products has a license that’s expired in one of the states they’re currently selling in? Do you know with 100 percent certainty that every producer in your distribution channel has a valid license and appointment both when they sell and when you pay out commissions? 

Security risk: How secure is your and your customers’ information? Are you storing personal identifiable information or protected health information? What types of information security protocols are in place? Have you invested in best-in-class information security measures and training for all staff? What are the chances someone has access to information they shouldn’t have, or that secure information is being kept in unencrypted documents – or even on someone’s desk? 

Reputation risk: What would it cost to repair your reputation if your organization made headlines because of a compliance misstep or security breach? Have you considered the financial ramifications of not only immediate legal defense, but public relations work and lost business from customers or investors who decide to leave after a public incident?   

The cost of lost distribution channels 

On top of being unattractive to internal talent, manual compliance management can make an insurance carrier unappealing to the downstream distribution partners you count on to power your revenue. 

You rely on agencies and their agents or producers to get your products to the consumers who need them. If doing business with you is more trouble than it’s worth, agencies and MGAs/MGUs have plenty of other options. 

Each of these risks comes with real financial costs. With the economic outlook in flux, and businesses looking to save money in case a looming economic recession materializes, these costs aren’t ones you want to leave to chance. 

How much does compliance automation cost?

To answer this question, you’ll have to look at your current costs versus the cost of implementing an automated producer compliance management solution. We predict, when you look at the full picture, that the cost of the right solution will be less than continuing to do things the way you’ve always done them. 

While you’ll have to pay for a solution, to be sure, the savings you’ll get back when you let your staff devote time to work that generates revenue or directly impacts customers (not tedious tasks they’d rather not be doing) will pay dividends. 

We can’t tell you exactly what your ROI, or the resulting true cost of automating compliance for your carrier will be (unless you speak with one of our team members about your specific situation!). But here are a few hypotheticals to consider. If your organization is in a similar situation to any of these, you can do some ballpark math to calculate your ROI.

1. You have a team of three who spend an average of six hours each, daily, on administrative work related to everything from agency and agent appointments to verifying license status to producer contracting. These tasks involve opening multiple spreadsheets, cross-referencing between NIPR and different state DOI websites, and chasing paper from each agency and its producers. What’s the cost of these hours, and what could staff be doing with those hours to further your business goals instead? 

2. One of your top downstream agency partners just onboarded five new, highly promising producers who came from other agencies with proven track records. The agency’s recruiting team spent months trying to entice them away from their prior agency and finally convinced them to join up. Unfortunately, due to the manual nature of getting them appointed, verifying their license status in different states, and all the other onboarding steps, it’s been four weeks (and counting) and these producers still aren’t out there selling. The new producers are frustrated, not making any money, and costing your agency-partner money every day they’re sitting in license limbo. In a worst-case scenario, this might be enough to make them reconsider their decision to join the agency at all. Not only does this cost real money immediately because these producers (who were selling for different carriers at their previous agency) are now not writing business, it also harms your relationship with your best distribution channel partner and could impact future business. 

3. You have two tenured employees managing producer licensing and compliance manually by cross-referencing spreadsheets and various state DOI websites. One of the employees is close to retirement and finding someone to fill the position is going to be nearly impossible with the current state of insurance talent. In the meantime, the non-retiring employee can’t possibly double their workload. Would the cost of automating the bulk of manual compliance tasks be worth it to relieve someone of tedium so they can focus on the work that only they can do, without the cost (in both time and money) of finding and training a replacement for the retiree? 

“Reviewing and approving agent contracts in AgentSync takes me a third of the time it would to do the same tasks in another system.” – Jay Moyer, VP – Director of Marketing at GPM Life

The cost-savings of real-time automated insurance regulatory compliance 

Welcome to 2023. We don’t know what the future holds in terms of the world economy, but we know insurance will always be vital to making it run. 

As you navigate the economic uncertainty of the coming year, faced with the constraints of tightening budgets, less headcount, and ever-growing revenue goals, you may want to look at the cost-saving benefits of real-time, automated producer compliance solutions. 

If you aren’t using technology to support your team’s efforts, you’re wasting time and money investing in manual compliance management. Instead, focus on integrated solutions that automatically update regulatory requirements and plug in accurate producer compliance throughout all of your business workflows. 

Ready to see how much money your agency could save by automating compliance and letting your humans do more valuable work? Download the Guide:10 Ways Carriers Can Make Compliance a Cost Saver to learn more about what to look for when you’re trying to automate producer license compliance for maximum cost savings. 

Key Takeaways: 

• Insurance carriers are trying to balance staying in compliance with shrinking budgets, increased revenue goals, staff recruitment and retention, and an uncertain economic outlook. 
• Compliance is a costly undertaking for insurance carriers and requires dedicated, highly experienced in-house staff to execute correctly – or, the burden of additional, wasted hours of manual effort on the part of staff that aren’t dedicated to compliance. 
• The way insurance carriers have managed producer compliance historically is manual, tedious, and error-prone work that doesn’t lend itself to what employees and distribution partners expect in terms of speed, ease, and efficiency. 
• Continuing to manage compliance the way you always have creates risks both in terms of hard financial costs and in other areas like reputation and information security. 
• Insurance carriers can dramatically reduce the financial cost of compliance along with many of the other risks you’re currently facing through real-time automated compliance solutions.