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Can compliance leverage as a competitive advantage?

03 August 2015 Dirk van den Berg, O’Keeffe & Swartz

The insurance sector faces a myriad of compliance challenges and has done so for a number of years. The pace of regulatory obligations and compliance complexity has been onerous from both solvency and market conduct aspects, the costs of which are significant at a time when operating and market conditions are exceptionally tough for the insurance industry.

Compliance incurs significant financial, infrastructure, technology and human capital costs to ensure that standards are adhered to. Given the compliance investments, it makes sense that business leaders think strategically as to how achieving compliance can be leveraged as a competitive advantage.

A wave of regulation

The insurance industry is not just dealing with regulations specific to insurance institutions, but a whole raft of consumer protection regulation too. Right now there is huge effort going into the Protection of Personal Information Act (POPI), but as the actual regulations are yet to be published, most organisations are grappling as to what exactly it is that they need to comply with.

Until the regulations for POPI are published, our view is to act within the ambit of best practice when it comes to protection of data, and avoid making huge financial investments in complying with assumed standards that may not meet the final POPI regulations.

Act within best practice

The approach in terms of direct marketing activity and POPI is to develop systems that are appropriately scaled and resourced, so that when the POPI regulations are published, people will be able to perform the related tasks to become fully compliant quickly and without making onerous demands over-and-above their routine work. It can be anticipated what the potential regulations will dictate given the spirit of the Act, but without incurring hefty financial investments that may not be in line with final regulations.

Despite the lack of clarity on actual regulations, the POPI Act has spurred institutions to clean up outdated legacy data platforms to get a single consolidated view of their customers, which can only be good for business and marketing efforts going forward – in this regard the banking sector has led the way. Right now, it is about getting the fundamentals of fit and proper data management sorted and in place, so that when the POPI regulations are published, it will be a relatively fast process to achieve the required levels of compliance.

Transforming to a proactive process

Obviously the knock on effect right through the supply chain of compliance is onerous. From the outset we took the view that becoming fully compliant with the latest regulations affecting our business and that of our clients was not only about preserving our ability to perform as a business, it also had to provide returns in the form of competitive advantage.

Together with our clients, we looked at reinventing the compliance process that would meet all our shared requirements, creating a playbook of processes and procedures that meet the requirements of the regulation, and is embedded in our staff training, our culture and our entire approach.

The investments in achieving this have certainly not been small from a financial and human resource perspective, but at the same time, the returns have been well worth it. By creating a formula for regulatory compliance we position ourselves to meet the future mandates of our clients quickly and efficiently.

From reactive to positive

Onerous regulation has often been cited as a serious risk to the industry and its competitiveness. However, these risks also provide opportunities for growth which can be best achieved by transforming compliance activities from a reactive task to a proactive process.

In an environment focused on customers and treating customers fairly, the regulatory landscape is more complex. With regulatory change continuing to be anticipated with a growing pressure on compliance, adapting to these changes is critical if intermediaries are to survive.

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