This article was produced in partnership with Gallagher Bassett
Keeping up with compliance requirements is becoming tougher for insurers to handle on their own – and insurers know it.
A new survey by Gallagher Bassett, released as part of The Carrier Perspective: 2024 Claims Insights report, reveals such issues as data privacy, staying abreast of regulation changes and cybersecurity as some of the leading concerns for insurers both worldwide and in the UK.
Insurers with stretched resources in a tough market know they need to do something – but many firms have more questions than answers on how to handle the increasing burden.
“There are certainly important questions that need to be addressed. Do carriers have a comprehensive strategy or plan in place to address a cyber event? Are there vendors lined up to act promptly as needed? How do carriers ensure their data is encrypted, and do they have measures in place to duplicate data if necessary?” said Gordon Vater, Managing Director Gallagher Bassett Technical at Gallagher Bassett United Kingdom.
Vater’s answer is simple – a problem shared is a problem halved.
“Using outside specialists emerges as the foremost strategy, with many carriers seeking advice from claims management providers, law firms, legal advisors, and compliance consultants,” he said.
Regulatory compliance is an area that is only going to increase in complexity, making the task of getting it right more difficult for insurers that may have managed until now.
Beth Povey, Chief Compliance Officer at Gallagher Bassett United Kingdom, suggests a likely surge in complaints on the back of consumer misunderstandings about opting for cheaper insurance premiums as a result of economic stress. Many don’t realise that cheaper premiums often result in reduced coverage – until they make a claim.
The Financial Ombudsman Service (FOS) is preparing for the surge by reducing case fees by £100 per case, to £650, and cutting compulsory and voluntary jurisdiction levies on businesses to help ease the financial burden on insurers facing complaints.
“The FOS foresees a significant influx of insurance-related complaints, with ongoing concerns about travel insurance due to flight cancellations and persistently elevated complaints related to motor insurance,” said Povey.
This means that compliance resources at many insurers may become stretched to breaking point. But Gallagher Bassett is well placed to fill the role of compliance expert and relieve the burden.
The growth of regulations globally around data matters is also a key risk for tech firms with business offshore, for example. Most tech firms have reporting obligations in multiple regimes and the rules in those regimes are constantly on the move.
Several states in the US passed or amended privacy regulations in the last few years. Updates to privacy laws related to the General Data Protection Regulation (GDPR) in the EU or extension of regulations from the California Consumer Privacy Act with the California Privacy Rights Act, which took effect in 2023, are some of the latest rules that tech firms need to be across in terms of their professional indemnity obligations. More regulatory change is also expected in the EU, the UK, Singapore, Australia and Japan in 2024.
Outsourcing this complicated task is a sensible strategy that not only helps insurers but also can result in a better service to customers.
“By leveraging external knowledge, insurers can navigate the complexities of customer-focused regulations. This approach facilitates compliance and underscores their commitment to a forward-thinking strategy,” said Vater.
Gallagher Bassett research shows that approximately 50% of insurers plan to leverage collaboration with law firms, legal advisors, and claims and risk management experts to stay compliant with changing regulations.
Insurers in the UK are less likely to collaborate with law firms for this task than global peers, with many planning to hire compliance consultants and a strong trend emerging around partnering with claims management providers - nearly 30% of UK insurers are exploring this avenue to fortify their compliance strategies.
“Collaborating with a claims and risk management provider can help streamline claims processes and foster a proactive approach to ongoing adherence to changing customer-focused regulations,” said Vater.
Outsourcing compliance allows insurers more time to deal with other key aspects of the business, including customer care and seeking out new sources of revenue.
“These partnerships empower leaders to increase profitability, enhance brand reputation, and outpace competitors.”
Both globally and in the UK, the main compliance and regulatory challenge that insurers anticipate for 2024 is data privacy and security compliance. According to the Gallagher Bassett survey, this issue was identified as the primary concern by 75% of both global and UK insurers.
But for most other anticipated compliance and regulatory challenges UK insurers were more concerned than their global peers, perhaps underscoring the increased level of regulation in the region and the growing burden it poses for UK insurers.
Staying abreast of regulatory change is more of a concern for UK insurers than globally, as is cybersecurity and data breach regulations, adoption of consumer protection laws, industry-specific regulatory changes and navigating international regulations.
Cybersecurity and data security threats are unlikely to abate any time soon. The 2024 Thales Data Threat Report, based a survey of nearly 3000 IT and security professionals in 18 countries across 37 industries, found that 93% of IT professionals believe security threats are increasing in volume or severity, a significant rise from 47% last year.
Thales research found that there was a very clear correlation between compliance and data security. Of those organisations that had failed a compliance audit in the past twelve months, 31% had experienced a breach that very same year. This compares to just 3% of those who had passed compliance audits.
Clearly, not keeping up with compliance in 2024 is not an option. In a fast changing regulatory and threat environment, there is inevitably a lag in understanding what systems, applications, and data are at risk, making it vital to line up proper and robust plans of action.
“Partnering with a dedicated compliance team ensures you can feel protected while moving forward with confidence in the constantly evolving regulatory landscape,” said Vater.
“At Gallagher Bassett, our premium claims and risk management solutions bring together collective expertise to make the complex simple for our clients and their customers,” he said.
Gallagher Bassett (GB) is the United Kingdom’s leading provider of claims and risk management solutions for insurance carriers. GB is committed to providing solutions that reduce risk, improve efficiency, and deliver superior outcomes.
