compliance’s role in adapting to the new business as … · until the webinar begins. • if you...

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COMPLIANCE’S ROLE IN ADAPTING TO THE NEW BUSINESS AS USUAL – BALANCING OVERSIGHT WITH AGILITY

June 10, 2020

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COMPLIANCE’S ROLE IN ADAPTING TO THE NEW BUSINESS AS USUAL – BALANCING OVERSIGHT WITH AGILITY

June 10, 2020

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Overview• CEFLI’s Antitrust Policy• Presentation• Q&A• Post-meeting Survey • Introductions

CEFLI presentations, discussions and resource materials do not constitute legal advice. Such information is intended to offer compliance perspectives and opinions of a general nature. Individuals with specific questions about a law or regulation should consult with legal counsel.

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Introductions

Jon BerryPartnerBanking, Insurance & Capital MarketsBoston, MA

Jonathan Berry is a Partner within Financial Services Advisory and Compliance practice at Guidehouse. With more than 20 years of experience in the Financial Services industry Jonathan assists financial institutions and insurance companies navigate the complex economic and regulatory environment. He specializes in helping clients with complex business and technology transformation efforts. As a transformational leader he has assisted dozens of clients assess, design and implement programs to enhance organizational effectiveness, increase profitability, strengthen customer interactions and develop sound compliance and risk management strategies.

Spyridon AntonopoulosAssociate DirectorBanking, Insurance & Capital MarketsBoston, MA

Spiro Antonopoulos has fifteen years of advisory experience across insurance, banking, and government, with extensive experience in the Life Insurance sector. Spiro has advised leaders across Operations, Finance, and IT at many of North America’s top carriers, including John Hancock/Manulife, Sun Life Financial, Penn Mutual, MassMutual, Symetra, Amica, and Travelers. He has helped clients navigate complex, multi-year transformation programs, helping to drive measurable improvements in cost management and operational efficiency, customer experience, and technology delivery. Spiro is currently Associate Director within the Financial Services Advisory and Compliance practice at Guidehouse.

Prasun K Howli, FRM, FIP, CISA, CRISC, CIPP/E, CIPM, CIPT, PMPAssociate DirectorBanking, Insurance & Capital MarketsHouston, TX

Prasun is a seasoned management consultant with experience in leading complex projects in business transformation, Information Technology (“IT”) strategy, IT risk management, cybersecurity, data privacy, post-merger integration and program management. He has acted as a trusted advisor to Chief Compliance Officer, Chief Information Officer, Chief Information Security Officer and Chief Privacy Officer. He has also managed system implementation litigation matters and FCRA compliance engagements. Most recently, he has backfilled the role of Head of Technology Risk and Compliance for a $1.7 billion fintech company on a temporary basis.

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Section I

Section II

Section III

Section IV

Section V

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5

8

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AGENDA

Section

I With You Today 9

Slide

II Current State of the Insurance Industry 10

III Key Compliance Challenges 14

IV New Roadmap for Compliance 16

Topic

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WITH YOU TODAY CURRENT STATE OF THE INSURANCE INDUSTRY

NEW ROADMAP FOR COMPLIANCEKEY COMPLIANCE CHALLENGES

Audience Demographics

Chief Compliance Officer, SVP, AVP or

Director

Insurance CarriersRegistered Participants

1010



The current crisis has resulted in insurers’ need to sharpen the focus of their core activities and values across multiple constituencies.

Brand, Profitability,

Sustainability

Customers

Employees

Regulators

Vendors and

Partners

Contain costs where possible and focus on value added services

Comply with directives efficiently without losing focus on growth initiatives

Provide value and instill trust in brand promise for existing and prospective customers.

Ensure health and wellness and supportive environment

1111

Audience Live Poll:COVID-19 Organizational Changes



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Insurer areas of concern regarding new business based on current economic environment and the fallout from the COVID-19 pandemic.

64%

58%

47%

31%

28%

14%

11%

14%

11%

8%

Pricing / new business profitability

Distribution (e.g., social distancing)

In-force profitability

Reserves and capital

Customer demand / value proposition

Liquidity

Other

Product design

Regulatory constraints (non-forteiture, 772)

Regular bandwidth

Source: COVID-19 New Business and Product Survey, LIMRA. 36 Life & Annuity carriers were surveyed in April 2020.

Indicates # of companies that rated given factor in top 3 in terms of importance

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Insurance Life Cycle – Activities in Response to Current Environment

Marketing & Distribution• Targeted customer outreach – upper

and lower funnel• Virtual meeting software• Online quote, application, and

illustration tools

New Business Process• Straight-through application

process including e-signature• Digitization of legacy processes• Term age/face requirement

changes

Underwriting• Removal of fluid-based medical

requirements• Tele-underwriting• Third-party data (e.g., EHR)• COVID-19 diagnostic data• Extended wait periods

Servicing and Claims• Policy payment and lapsation

directives• Rapid decedent identification• Fraud detection

Product & Pricing• Profitability studies to address excess

mortality• Re-pricing (e.g., Term)• Proactive lapse rate identification• Removal of certain products

(guaranteed and non-guaranteed)

Processes & Collaboration• Collaboration tools• Workforce return policies• Cost containment

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Audience Live Poll:Post COVID-19 Areas of Concern



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Speed-to-market risk due to state filing processes as a result of product changes

Underwriting risk due to unknown changes in mortality / morbidity

Financial risk due to persistently low interest rates and deterioration of credit quality

Cybersecurity risk due to increase in external attack and weak control environment

Third-Party risk due to business disruption and inability of service providers to provide remote support

Legal and Reputation risk due to communication, change management, and health issue

Regulatory risk due to new state regulations

Data Privacy (PII/NPI/PHI) risk due to lack of adequate controls for remote work environment

Compliance engagement is part of a broader portfolio of risks facing insurance companies, from regulatory, to cybersecurity, to fraud and reputational risk.

Fraud risk due to dependency on legacy solutions and manual processes

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Tactical Steps: The Pandemic has raised some unique challenges that business continuity plans may not fully address. Some of the key steps for addressing the crisis are outlined here.

Leadership and Change Management

Operation/Service Management

The pandemic has created challenges across all the business processes. The new way of doing business requires a shift in the normal processes including: - Managing the remote

work environment - Digitizing legacy

business processes

The pandemic has reinforced the need to forge an agile culture within the carrier’s organization through: - Consistent

communication- Agile teams and better

collaboration tools- Increased adaptability- Innovative mindset

Work Environment and Human Resource

Cybersecurity

Covid-19 has accelerated the cybersecurity attacks. Carriers need to retool their risk management processes including,- Risk identification- Risk assessment - Employee training - Detection, response

and recovery related to control failures

Covid-19 requires insurance companies to adopt new ways of working, including:- Managing employee

morale by adopting people-first mindset

- Modifying HR policies to support a safe work environment

- Prioritize succession planning initiatives

Regulatory Risk Management

Data Privacy

While Public health is a critical issue, regulators / data protection authorities are calling upon all organizations to pay respect to the Privacy of individuals. Carriers need to develop a Privacy program that can address multiple regulatory requirements

Carriers must navigate new directives on top of standard regulatory requirements. To manage these regs, carriers must:- Update policies and

procedures- Communicate with

policyholders- Digitize legacy

processes to reduce costs of changes

Financial Risk Management

Third-Party Risk Management

Organizations need to review their third-party dependency in light of the new development including- Analysis of outsourced

services - Third-party risk

assessment framework- Service level

agreements

The low interest rate environment and stock market volatility have created a unique challenge. For managing its liability, carriers need to review their hedging strategy against: - Interest rate risk- Liquidity risk- Credit risk- Market risk

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Strategic Roadmap and Technology Imperatives: While cost cutting initiatives may take priority in the current environment, there is a unique opportunity for carriers to accelerate digital transformation efforts, in order to acquire new customers, improve operational efficiency, and create resilience for the future.

Build out direct to consumer channels (e.g., website chatbots for product discovery and online application, online quote and illustration tools including mobile app) to improve customer outreach and quote-to-sale conversion rates, increasing new business and profitability.

Digital Distribution channel

Utilize third-party data sources including electronic health records and develop predictive models based on advanced data science techniques to help carriers provide more granular pricing and improve mortality risk assessments while driving down unit cost. .

Enhanced Underwriting

Leverage AI and machine learning to automate the claim management and decedent identification processes by replacing the manual document intake and review of low risk claims, which will reduce processing costs and improve beneficiary experience.

Automated Claims Processing

AI-driven software can address high call volume, triage calls for prioritization and address specific customer needs which will improve customer experience. New blockchain-based solutions may provide auditable means of disbursement payouts, as well as other use cases (e.g., deep fake identification).

Enhanced Customer Support

Outsource aspects of the current compliance process to drive cost containment while ensuring onshore resources focus on highest risk activities.

Outsourced Compliance

Develop a holistic Cybersecurity and Privacy risk management program based on fundamental data protection and privacy principles, along with reporting and remediation strategies, which help carriers to address multiple federal, state and international regulations.

Enhanced Data Security and Privacy Posture

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Q&A

© 2020 Guidehouse Inc. All rights reserved. This content is for general informational purposes only, and should not be used as a substitute for consultation with professional advisors. This publication may be used only as expressly permitted by license from Guidehouse and may not be otherwise reproduced, modified, distributed, or used without the expressed written permission of Guidehouse.

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CONTACTS

JONATHAN BERRY Partner, Banking, Insurance and Capital Markets Practice(617) [email protected]

SPYRIDON ANTONOPOULOSAssociate Director, Banking, Insurance and Capital Markets Practice(617) [email protected]

PRASUN K HOWLI, FRM, FIP, CISA, CRISC, CIPP/E, CIPM, CIPT, PMPAssociate Director, Banking, Insurance and Capital Markets Practice(713) [email protected]




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NEXT WEBINARJuly 2020The SEC’s Regulation Best Interest–Key Implementation Challenges and Lessons Learned

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