Encouraging signs in regulatory compliance are offset by 14% jump in risk management concerns in Wolters Kluwer’s Industry Indicator
Wolters Kluwer today announced the results of its Regulatory and Risk Management Indicator survey of U.S. insurance companies, showing the level of regulatory and risk concerns rising to a score of 99 in 2017 compared to the overall Indicator score of 97 in 2015. Anxiety levels among insurers jumped 14 percent since the 2015 survey, from 42 percent to 56 percent, in gauging their organizations’ ability to manage risk across all lines of business.
Regulatory environment metrics reflected a mix of positive and discouraging news: the number of enforcement actions dropped from 825 in the 2015 survey to 685 in the most recent 12-month period, while total dollar amounts in fines assessed dropped from $27.7 million in 2015 to $15.8 million. However, the number of industry citations jumped from a total of 18,242 in 2015 to 22,522 in the most recent 12-month period measured.
“While overall compliance concern levels rose only slightly compared to the previous Indicator scores, the ability to keep pace with the continued growing burden of regulations clearly remains a very real challenge facing insurance companies,” said Chuck Ross, Vice President and General Manager for Wolters Kluwer’s Compliance Program Management business. “Moreover, the significant upward leap in risk management anxiety indicates that many insurers are nowhere near a manageable comfort level when talking about their organizations’ relative risk exposure.”
Despite positive strides taken by many insurers since 2015 to better manage organizational risk, the findings showed a considerable gap in respondents’ perceived focus on fundamental compliance program management elements versus actual planned investments. This disconnect was most noticeable for regulatory change management (37 percent gap), regulatory insight capabilities (36 percent gap) and risk and control assessments (30 percent gap).
“While our survey doesn’t measure why risk management concerns have spiked,” noted Ross, “it is very likely that the wave of high-profile media stories detailing data breaches, hacking, and other risk control failures across the financial services sector has contributed to insurers’ heightened angst about their ability to manage risk.”
Among risk management issues that respondents anticipate will receive escalated priority in the coming 12 months, cybersecurity ranked first, at 67 percent, followed by regulatory risk (43 percent), data governance (39 percent), IT risk (34 percent) and operational risk (30 percent). In describing their organizations’ risk management efforts, 44 percent cited having an integrated, strategic enterprise risk management program in place actively used by all departments, up from 35 percent in 2015. And in a new survey question, nearly half of all respondents (45 percent) confirmed their organization’s use of a centralized risk register to monitor risks.
The Indicator was conducted nationwide in July 2017 and generated 377 responses this year, covering the period between July 2016 to June 2017.