Regulatory &

Risk Management
Indicator

U.S. Insurance Industry November 2014

When you have to be right

 Regulatory & Risk Management Indicator
U.S. Insurance Industry - November 2014
An Overview
Wolters Kluwer Financial Services Insurance
Regulatory & Risk Management Indicator measures 10
critical factors that help illustrate the overall level of
regulatory and risk management pressures the
U.S. insurance industry faces.
These factors include concern over the ability to track
regulatory changes, comply with new and existing requirements,
and prove compliance to regulators. The time and resources
organizations have invested in compliance efforts was
also measured.
Risk management factors measured include insurance carriers
sense of how effectively they are managing overall institutional
risks, the involvement, buy-in and ability of the executive team at
managing risk, and the time and resources they have invested in
these risk management efforts.
For the final three factors of the Indicator formula, Wolters Kluwer
Financial Services measured and compared the number of affected
citations, the number of new enforcement actions and penalties
and the total dollar amount of regulatory fines levied.
What follows in this report are the results of the Indicator itself.
Some sections of the survey are highlighted, including:
n Growing Compliance and Risk Management Concerns
n Top Concerns Related to New / Changing
Regulatory Requirements
n Top Risks Organizations Face
n Managing Risk Effectively
To obtain the full data set used to compile the Indicator, please
contact us at WKFSCorporateCommu@wolterskluwer.com
Indicator Methodology
Wolters Kluwer Financial Services surveyed over
300 insurance organizations on their most pressing
regulatory and risk management concerns in October
2013 and then surveyed approximately the same
number again in September 2014. We used the
resulting measurements along with the changes we
monitored in the actual regulatory environment to
develop the latest Indicator.
 Regulatory & Risk Management Indicator
U.S. Insurance Industry - November 2014

111
1
12
95 121
COMPLIANCE 111 Regulatory RISK MANAGEMENT
MAIN INDICATOR Tracking Regulatory
Change
95 FACTORs
Affected Citations

(Number of citations
Effectiveness

Environment FACTORs FACTORs

enacted and adopted
0 100 0 during the period.) 200 0 200

111
1
12
97 185 144
95 121 111
144

Compliance with Enforcement Leadership Impact

Requirements Actions
18
Tracking Regulatory Affected Citations Effectiveness

146
5

Change

97
(Number of new
enforcement actions
0 100 0 and penalties leveraged 200 0 200

146
during the period.)
95
(Number of citations

2
12
enacted and adopted
0 100 0 during the period.) 200 0 200
94
Proof to Regulators
346 Fines
122
Resource
346 Investment
94
(Represents total
dollar amount of fines
0 100 0 400 0 200
Regulatory &

97 185 144
levied during the period,
represented in $000.)

Risk Management 144

Indicator
0 200 Compliance with Enforcement Leadership Impact
142 142 Requirements Actions
18

146
Resource 5
SHARP RISE IN THE OVERALL INDicator FOR INSURERS AUGMENTEDInvestment

97
(Number of new
enforcement actions
BY INCREASES IN INDUSTRY REGULATORY METRICS 0 100 0 and penalties leveraged 200 0 200
146

0 200 during the period.)

Concern with compliance and risk factors remained high or increased

in several key areas, and levels rose significantly in all of the industry

2
12
metrics measured, resulting in an overall sharp increase in our Indicator.
The Main Indicator score rose to 146 from its baseline of 100 established
in October 2013. The Indicator also points to concern over obstacles 94
Proof to Regulators
346 Fines
122
Resource
to managing risk at the enterprise level, with overall scores in this area 346 Investment
increasing over the previous survey period. The cyclical nature of state- 94
(Represents total
by-state variations inherent in the regulatory environment is a notable 0 100 0
dollar amount of fines
400 0 200
Regulatory &
levied during the period,

contributing factor to shifts in the overall indicator score. represented in $000.)

Risk Management
Indicator and risk management issues
0
While concern and attention to compliance
200
continue to grow, the Indicator reveals a trend with insurance carriers
investing in more resources to address these areas. In particular, data
indicates organizations are focusing on addressing risk management gaps,
142
Resource
142

although monitoring and maintaining compliance with changing regulations Investment

is also an area where the industry is focusing their resource investments.

0 200
 Regulatory & Risk Management Indicator
U.S. Insurance Industry - November 2014

Overall LEVELS OF CONCERN with Compliance and Risk

(Percentage of respondents Rating Concern as a 7 or higher)
Maintain Compliance
with Changing Regulations
Keep Track of
Changing Regulations
Demonstrate Compliance
to Regulators
Manage Risk Across
All Lines of Business
0%
NOVEMBER 2014
When asked to indicate
64%
top concerns for their
organization in their
66% own words, respondents
provided a variety of
60% candid responses.
63%
Maintaining compliance
and keeping up with the
57%
constant regulatory and
60% requirement changes
(34% of respondents)
44%
Implementing all the
44%
different requirements
and changes to those
20% 40% 60% 80% 100%
requirements
(18% of respondents)
OCTOBER 2013
Maintaining growth
and profitability due to
compliance costs and
regulatory and risk concerns
(9% of respondents)
 Regulatory & Risk Management Indicator
U.S. Insurance Industry - November 2014

TOP CONCERNS related to new or changing requirements

(Percentage of Respondents Rating Concern as a 7 or Higher)

70%
Market Conduct Exams
66%

59%
State Rate/Form Filing
Requirements 58%

59%
Electronic Business
Transactions 58%

57%
Privacy and Data
Protection 55%

53%
Consumer Complaint
Compliance 58%

0% 20% 40% 60% 80% 100%

NOVEMBER 2014 OCTOBER 2013

 Regulatory & Risk Management Indicator
U.S. Insurance Industry - November 2014

TOP RISKS
(Risks selected as one of the top risks by percentage of respondents)

54%
Regulatory Risk
45%

37%
Operational Risk
34%

33% There were few statistically

Market Risk significant differences by type
25%
and size of organization, however
the survey revealed that regional
30% insurers were more concerned with
IT Risk fraud and vendor risk than other
27% types of insurers.

26%
Third-party Relationships
21%

23%
Fraud
17%

0% 20% 40% 60% 80% 100%

NOVEMBER 2014 OCTOBER 2013

 Regulatory & Risk Management Indicator
U.S. Insurance Industry - November 2014

Overall RISK MANAGEMENT efforts

(Percentage of respondents selecting RISK MANaging effort)

We havent started risk 1%

management efforts yet. 3%

Of the carriers with a

We understand and manage our
risks but dont have a formal
process or program in place.
We utilize a well-defined risk
management process but not
an overall program.
We have created a formal program
but it isnt used consistently
throughout our organization.
We have an integrated risk
management program that is being
used actively by all departments.
13%
strategic enterprise risk
11% management program in
place or even an integrated
7% risk management program
that is actively used by all
5%
departments, data indicate
many are likely to be just
16% beginning the process,
11% a factor which has been
consistent since our first
11%
survey in October 2013.
14%

We have a strategic enterprise 26%

risk management program that
26%
management uses to control risk.

0% 20% 40% 60% 80% 100%

NOVEMBER 2014 OCTOBER 2013

 Regulatory & Risk Management Indicator
U.S. Insurance Industry - November 2014

TOP OBSTACLES TO MANAGING RISK AT THE ORGANIZATIONAL LEVEL

(Percentage of respondents selecting OBSTACLE)

Too many technology systems 32% With organizations looking

that are not integrated.
A disconnect between risk
management processes
and strategic plans.
The lack of quality data,
management, and analysis.
A lack of transparency into risk
management decisions.
Processes that do not empower
employees to own/manage risk.
The lack of a consistent numbers-
based scoring framework.
inward as they adopt a risk-
30%
based approach, internal
obstacles to managing risk
21%
increased while regulatory
14% pressures fell out of the top
five for the first time since
17% our surveys inception.
13%
Indicator results continue
to reveal potential
17% vulnerabilities in the risk
15% management framework at
these organizations, just as
the strategic enterprise
17%
risk management programs
14% are about to be tested in the
coming quarters.
17%
11%

NOVEMBER 2014
14%
Regulatory pressures. OCTOBER 2013
15%

0% 20% 40% 60% 80% 100%

 Regulatory & Risk Management Indicator
U.S. Insurance Industry - November 2014

About Wolters Kluwer Financial Services

Whether complying with regulatory requirements or managing financial
transactions, addressing a single key risk, or working toward a holistic
enterprise risk management strategy, Wolters Kluwer Financial
Services works with more than 15,000 customers worldwide to help
them successfully navigate regulatory complexity, optimize risk and
financial performance, and manage data to support critical decisions.
Wolters Kluwer Financial Services provides risk, compliance, finance and For more information
audit solutions that help financial organizations improve efficiency and about Wolters Kluwer Financial Services,
effectiveness across their enterprise. With more than 30 offices in 20 or our Regulatory and Risk Management
countries, the companys prominent brands include: AppOne, ARC Indicator, please contact us at
Logics, AuthenticWeb, Bankers Systems, Capital Changes, CASH WKFSCorporateCommu@wolterskluwer.com
Suite, FRSGlobal, FinArch, GainsKeeper, NILS, TeamMate, Uniform
Forms, VMP Mortgage Solutions and Wiz. Wolters Kluwer Financial
Services is part of Wolters Kluwer, a leading global information services
and solutions provider with annual revenues of (2013) 3.6 billion ($4.7
billion) and approximately 19,000 employees worldwide. Please visit
www.wolterskluwerfs.com for more information.

2014 Wolters Kluwer Financial Services, Inc. All Rights Reserved WKFS-14-3812 INSURANCE-R&R-MANAGEMENTINDICATOR 11-2014