Authors: Jason Hudson, Principal & Director, Statistical Reporting & Data Services and Mark Nawrath, PMP, MBA, Principal & Director, Account Management
Statistical reporting requirements are always evolving. This fact won’t change anytime soon. Insurance companies still grumble about regulatory compliance but it’s best to just accept it: compliance reporting is an unavoidable cost of doing business.
Admitted insurance companies in the U.S. are required to send their premium, policy and claims data to a designated statistical agent. If you send incorrect data or your data is not delivered in a timely manner, your company can be fined–or shut down. Yes, it negatively impacts your bottom line. No, it’s not optional. Try to dodge reporting or cut corners and you’ll end up paying for it later in lost time, penalties or costs associated with bringing your reporting system up to date.
Here’s what you need to know about compliance reporting–and how to do it the right way.
When working with legacy systems and forms requirements that vary by state and line of business, it’s a challenge to generate quality data in a usable format. Though it sounds like a simple mapping exercise to match data points and formats, it can actually become a time- and labor-intensive process that still results in data omissions. Since ratings agencies and other regulatory bodies require data that is derived based on their respective reporting requirements, it’s smart to work with an insurance operations consulting firm who can ensure that you’re capturing and reporting the correct information, no matter from which system you are drawing your data.
Remember: compliance reporting is not optional. You need to establish data capture and reporting processes that meet agent and state requirements and every line of admitted business your company writes. Implement a statistical reporting best practice that addresses the whole picture, even if it means capturing data that you might not appear to “need” right now. The more quality data you capture, the more easily you will be able to meet the conditions of the statistical agents, Departments of Insurance and/or the NAIC, even if they change over time.
Stay on the front end of developing your stat reporting best practices. Don’t be reactive. Take into account the lead time required to incorporate new codes and new and updated insurance products, while staying on top of the constant influx of data from the products you currently offer. Putting a comprehensive compliance reporting strategy in place frees you from attachment to individual staff members who might retire or otherwise move on, taking your company’s compliance processes with them.
In an industry as heavily regulated as insurance, no error or oversight is ever insignificant. When working with an outside consultant to develop and implement a compliance reporting plan, partner with a consulting firm with specific expertise in insurance. General operations and technology consultants may offer assurances that they can manage insurance compliance, but they lack the in-depth knowledge required to develop a plan that addresses the increasingly complex insurance bureau requirements. Speak candidly with your insurance operations consulting firm before buying a new software system or implementing a new process so they can ascertain the extent of your needs and help you develop a system that addresses all aspects of your reporting.
Managing so many forms of disparate data can quickly overwhelm an insurance company’s internal compliance department. One option is to use statistical reporting software tailored specifically to the needs of insurance companies. We developed the Perr&Knight data model solution for precisely this reason. The software’s powerful insurance-specific algorithms process your company’s data and formats for appropriate reporting to various regulatory bodies.
However, keep in mind that software is no substitute for insurance expertise. We’ve seen insurance companies purchase expensive data management systems that were billed as having the ability to do stat reporting but ultimately can’t deliver. These systems can capture data, but because they were not designed with complex requirements for compliance reporting in mind, they don’t have logic in place that can normalize the data, apply the appropriate rules and ultimately meet bureau specifications.
At Perr&Knight, another option is available: we can handle statistical reporting for you, using what we call the “over the fence method.” We ask our clients to simply toss all their data, in its various formats, “over the fence” to us. We then create and execute a series of processes to combine data sets, resulting in a clean format that matches the requirements of various regulatory bodies.
For a mandatory practice, regulatory compliance is remarkably complicated to manage. Mistakes are costly and most in-house compliance departments have a hard time keeping up. Implement a well-thought-out process and you’ll put your company in the best position to maintain compliance, no matter the requirements, and to be best prepared when changes arise.