The burden of compliance for any insurance/financial services agent can be daunting, but the consequences of ignoring its implication are worse. You face paperwork from multiple local, state and federal agencies requiring you to meet their standards or incur penalties as a result. Once it is known that you have failed to meet the standards set by any of these groups, that news can damage or even destroy your business and your ability to sign and retain customers, because clients associate respectable insurance agents with possessing integrity and commitment to follow the rules.

If you cannot fulfill what is required by governmental bodies in verifying anything from your policies and procedures to audits and assessments, no amount of money spent elsewhere can make up for the cost of this oversight to you and your business. On the other hand, if you make the effort to be compliant, you will in turn help make your clients compliant in insurance coverage as well, thus not only saving you from additional headaches in dealing with their policies, but also generating you more customers through good word-of-mouth.

Compliance trends in virtually every industry point to several common themes that offer significant challenges and opportunities.

1. Regulated Environments Are Increasing In Number And Tightening Their Grip. All industries have regulatory constraints. Whether they are governed by common Department of Labor requirements or more complex FDA-driven standards, the number of businesses that are regulated continues to increase. In addition, there is an “inflation” associated with regulatory climates caused by two primary factors. First, agencies tend to increase regulatory scrutiny on their own (typically after an incident). Second, there is a natural competitive force driven by diverse state, federal or international standards which tends to raise the bar, i.e., everyone needs to meet the most stringent requirement. These two effects result in a definite increase in the regulatory climate – and that regulatory grip is only getting tighter.[1]
2. Fewer Inspectors With Greater Oversight. While regulatory environments are increasing, most government agencies lack the funding and/or staffing to provide appropriate oversight of their regulated entities. This trend toward insufficient staffing is only getting worse. Fewer inspectors are now required to keep track of an increasing number of companies in more complex regulated environments. In many industries, in fact, it is not uncommon for new businesses to suffer major start-up delays due to an insufficient number of qualified inspectors.
3. Robust Compliance Management Systems Will Be Required. The increasing regulatory trend and reduced staffing has accelerated the need for robust compliance management systems. While some regulators and trade associations have recommended compliance management systems as a voluntary best practice, others have actually imposed these systems upon their members. In addition, a growing number of regulatory agencies are also insisting on sufficient remote access so that inspections can be conducted without the added travel expense. It is clear that robust compliance management systems are now gaining traction and will soon become the norm.
4. Benefits Of Compliance Management Systems Are Significant. While there is an understandable reluctance to launch a compliance management system – let alone one that can be monitored remotely by government regulators – the benefits are generally significant and fall under two main categories:
1. Reduced Cost of Compliance. Compliance has generally been viewed as a necessary cost center, i.e., the cost of doing business in a particular industry. In that spirit, a compliance management system drives two fundamental benefits:
1. Reduced cost of compliance can result in annual savings of greater than 30 percent. Savings are easily measured and typically focused on reduced overhead associated with administration, oversight, reporting, auditing and other routine compliance management functions.
2. Reduced cost of non-compliance is actually more difficult to measure or predict, but the savings tend to be orders of magnitude greater.[2] A company charged with a serious non-compliance finding can plunge into an uncontrollable downward spiral. Robust compliance management systems not only prevent entities from non-compliance (or at least from being blind-sided to non-compliance), but they demonstrate a genuine intent to do the right thing, which is typically an important factor when regulators are determining follow-up actions and fines.
2. Increases Sales. Perhaps the newest and most important trend enabled by compliance management systems is when they are used as a competitive discriminator to drive new sales. In addition to providing clear positive differentiators against your competition, a solid compliance management system can also give buyers some welcome peace of mind.
5. How can insurance agents use compliance management in their toolkit?
1. Become certified in compliance by working with recognized leaders who can facilitate your training and administer your certification process under a government approved system.
2. Help clients understand the two sides of compliance – the carrot and the stick. Most think of compliance management solely as the necessary evil (“stick”), but you can stand out by helping clients understand how they can utilize their compliance management as a differentiator in driving new sales.

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