Insurance companies are concerned about the expanded intrusion of regulations into very detailed aspects of their operations – to the point where it may start to colour how carriers are connecting with their brokers.
Regulation was identified as the top threat facing Canadian insurance companies in an Insurance Banana Skins survey conducted in 2013 by PwC. The survey reflected the opinions of 660 insurers, regulators and industry observers across 54 countries, with 47 responses coming from Canada.
Allan Buitendag, national consulting insurance leader at PwC, said regulation of the insurance industry has gone beyond its traditional scope of financial reporting and capital management to encompass things like governance strategies and structures, vendor relationship management, technology use, reporting, external and internal auditing and other very detailed aspects of operations.
Given the increased amount of compliance work that insurance companies are doing around these spheres of the business, brokers may find their relationships with insurers affected.
For example, insurance companies’ regulatory requirements may affect how brokers access their carriers’ systems in the future, what level of authority brokers are granted, and how the information and technology shared between brokers and their markets is to be governed.
In other words, brokers have a stake in the regulatory burdens assumed by their carriers. And yet, since the regulations are directed primarily at the carriers, brokers don’t have a direct way to influence how expanded regulation may affect the broker distribution channel.
“One could say that the broker is not going to have a lot of input,” said Buitendag. “The companies are dealing with what they need to deal with to address regulatory concerns. And you know what? I suspect the broker shall, by definition, have to follow suit.”
Insurers’ and brokers’ use of telematics – also known as “pay-as-you-drive” insurance schemes – are similarly influenced by regulatory activity. Regulators have been explicit that costs associated with the use of telematics devices, which monitor data in the car that are transmitted to the insurance company, cannot be passed on to consumers by raising their premiums.
“What that means is that companies now have to figure out how to clearly allocate that cost so that it doesn’t show up in the premium,” said Buitendag. “It also then means the technology that brokers or consumers would use is influenced by what the regulators are allowing or mandating.”
