Government regulators have been trying their ultimate best to intensify focus on controls in order to prevent financial meltdown. As such, regulatory scrutiny best practice has become even more acute than it has been in the past.
As a result of these developments, mortgage obligations and compliance problems have come into the spotlights. Consequently, insurance companies are expected to face the following challenges in 2012 and in the near future:
Audits and inspections are routine best practices in insurance industry. This year, insurance firms will be subject to examinations like banks. They will have to provide detailed portfolios and their insurance history. External regulatory auditors will visit insurance firms to understand and track information required and available for ongoing business.
Data breaches have become too frequent as hackers continue to use more sophisticated means. This is why regulators are turning their attention towards client data protection for best practice. This is where insurance companies will be facing greater challenges. Client data that insurance firms hold is very crucial and sensitive. It includes medical details and credit card information which hackers can take advantage of.
Therefore regulators will probe information about how client data is being protected and where it is stored. They will make sure that there are satisfactory measures to safeguard sensitive information.
Since the coming of Sarbanes-Oxley in 2002 for best practices, corporate governance has become a hot topic. This is why the National Association of Insurance Commissioners and the Securities and Exchange Commission have taken more interest in the quality of governance. A corporate governance committee is no longer enough for best practice.
There has to be governance with other groups involved, which will make it easier to take decisions using company information. That means that regulators will be required to look into what decisions have to be made based on governance committee recommendations.
Confirming whether customers have provided accurate information is a very important best practice. There have been frauds in the past due to wrong information and stolen identities. Insurance companies will have to take more drastic measures to ensure that customers are actually who they say they are. This will require best practices like proper documentation and more information.
It has been announced that, as of 1st January 2013, US officials working in collaboration with the European Union will have to ensure compliance with the new policy known as Solvency II Directive. According to this policy (or best practice), insurance companies will have to guarantee the policies they are selling in the European market. This will involve duplicate reporting and forwarding one to the European Union in the form of a financial statement.
Therefore, presently there seems to be a balance between the government and insurance companies. While the government figures out how to ensure regulation of policies for insurance firms, the firms ensure compliance with existing policies. Insurers are at the same time finding necessary means of ensuring compliance and best practices with future regulations.