Harnessing technology to mitigate compliance challenges for insurers

Insurance producers are required to obtain licenses and, in most cases, be appointed with the respective carrier to sell, solicit or negotiate insurance contracts in any state where they operate. Managing these licenses has become increasingly challenging for insurers due to the rapidly growing number of producers and the ever-increasing complexity of insurance regulation. According to the NAIC Insurance Department Resource Report, in 2012, there were approximately 6.4 million insurance licenses held by just under 2 million individuals. Fast forward to 2022, and the number of licenses has nearly doubled, with almost 12 million licenses held by slightly over 2.25 million individuals. This exponential growth in licenses far exceeds the increase in the number of individual producers. Compounding this growth challenge is an average of over 300 regulatory changes each year that insurance compliance teams must manage and respond to.

Maintaining licensing requirements

The proliferation of licenses has significantly heightened the complexity of compliance for insurers. To address this challenge, many insurers are turning to technology for assistance. Each insurer is unique, often requiring the management of different distribution channels, each with their own complexities.

Insurers with a captive producer sales channel encounter challenges in keeping up with license renewals and ensuring employee producers stay current with their continuing education requirements. Those using independent producers face additional challenges, as they must ensure that the producers adhere to state requirements and renew their licenses promptly. Utilizing technology can help streamline and manage these processes, thereby increasing the carrier’s overall compliance.

However, obtaining and maintaining the licensure requirement is just one aspect of the complexity. To function effectively, many other carrier systems can benefit from licensing-related data. Leveraging technology and providing licensing data to other systems can assist insurers in enhancing compliance in areas such as distribution, underwriting and commissions. Fortunately, solutions are available that benefit insurers by providing a high level of automation and integration, helping them effectively manage the risk of non-compliance.

Using technology to ensure compliance

Insurance compliance professionals are not only tasked with ensuring individual producer compliance and feeding that compliance data to multiple downstream systems but are also required to stay on top of hundreds of regulatory changes each year. Technology solutions exist today to house licensing data, apply rules against that data (to ensure only compliant actions are taken), integrate that data into multiple downstream systems (as well as receiving intelligent requests from upstream systems), and extract data as needed to prove compliance to regulatory bodies. All of this technology insulates the compliance team from the multitude of changes that happen each year, including license numbers, names, expiration dates, effective dates, lines of authority, etc.

Current technology empowers full producer lifecycle management from the recruiting, onboarding, and contracting of a new producer through the maintenance of that producer, including license and appointment renewals, demographic changes and additional license applications. At the end of the relationship, the appointment and contract can be terminated electronically, and the data can be stored for the 7-10 years required by law. Integration options extend from APIs and web service calls to batch files and ad hoc reporting based on the needs and capabilities of each company’s other systems.

Ultimately, insurance compliance professionals can be more efficient, scalable, compliant and responsive through the use of time-tested technology solutions that will not only improve their level of productivity but also enhance their producer experience and enable their business partners to interact more effectively for a healthier compliance ecosystem.