A changed mindset will help insurers to cope with compliance and regulation

Compliance and regulation requirements for the insurance sector have increased significantly over the past three years. In order for role players in the South African insurance sector to remain locally and globally competitive, companies must invest more resources (time and capital) in technology. By automating routine processes insurers can better equip their staff to deal with regulation and the resulting compliance load.

Jonathan Holden, Executive: Operations at Lion of Africa Insurance, says that the local insurance industry must take a hands on approach to keeping up with information technology (IT) capabilities, which are increasing exponentially. "The adoption of new regulations is vital to the evolution of South Africa’s insurance industry. It ensures that local players are on a level playing field with their international counterparts by forcing them to implement or adapt their compliance and regulatory monitoring systems and thereby keep up with increasing administrative demands,” he says.

Industry stakeholders need to change too. A mindset shift is needed whereby companies see compliance and regulation requirements as an opportunity to position themselves as thought leaders in the industry rather than as an obstacle. It is time for each and every one of us to embrace change!

In order to do so companies need to staff up and capitalise on new technology that will advance communication channels between themselves, brokers and clients, thereby improving operational efficiencies. He says while many insurers recognise the need for new regulations and acknowledge the benefits they bring, they worry about the associated cost increases.

"The key to business success is to run an efficient operation,” says Holden. "An efficient company achieves greater productivity using fewer resources over time. Companies therefore need to become more actuarially and scientifically driven by developing and adopting innovative software tools.”

An example of such technology is the business rules management system recently adopted by Lion of Africa Insurance. The decision management tool produced by FICO® Blaze Advisor® assists the insurer in the day-to-day operation of its insurance book. It drives constant underwriting decisions, reduces costs and puts competitive offers into the market faster.

Holden says software such as this will help the company to create, modify, test and monitor underwriting decisions across its business, eliminating the cost and effort of supporting several different rating engines and processes. Moreover, he says it is essential that employees buy into new processes and technologies. Employees should be included at each step of a technology-based process improvement project. They should be briefed beforehand, asked for input on project objectives and receive appropriate training post-implementation.

An insurer response to new legislation can be measured with reference to the Solvency Assessment and Management (SAM) implementation, currently underway. "SAM is providing the impetus and urgency to train current staff as well as employ new staff and external consultants to deal with compliance and regulation,” says Holden. "It is also forcing us to re-think our position on regulatory intervention and embrace the longer-term benefits rather than curse the short term sacrifices”.

A decade ago it was possible to comply with legislation using traditional systems and processes. But without effective program design and continuous management of new technology it will be impossible for insurers and brokers to meet the regulatory requirements going forward.

Companies need to view the impact SAM will have on the insurance industry in a positive light. "SAM calls for companies to produce data that is more accurate, helping them to understand their business and their risks better. This also enables companies to evolve and build a stronger business footprint, both locally and internationally,” concludes Holden.