The Virtuous Cycle of Compliance and IT?

November 4, 2004

Abstract

New York, NY, USA November 4, 2004

?

By shifting to a strategic, issue-based approach, Celent believes that insurers could reduce their compliance-related IT spending by as much as 25 percent, or more than US$350 million industry-wide.

The importance of regulatory compliance is at an all-time high for insurers and their IT departments. Between Sarbanes-Oxley, GLBA, HIPAA, USA PATRIOT Act, and various state regulations, Celent estimates that insurers are devoting an average of 20 percent of their new project IT budgets (or US$1.4 billion industry-wide) to compliance-mandated projects.

In a new report, ?, Celent examines the key compliance, IT, and business issues facing insurers and how they overlap. The report briefly highlights some compliance-driven IT projects that delivered broader business value. It concludes with key points for both insurers and solution providers.

Insurers have had a tendency to approach compliance on a statute-by-statute basis, scrambling to meet the specific requirements of each new mandate without taking a holistic and strategic view of their common issues. Celent believes that by shifting compliance IT efforts from a reactionary, statute-based framework to a strategic, issue-based one, insurers can reduce the "compliance-mandated" component of their new project spending by at least a quarter.

"Most compliance mandates involve a few key issues, which in turn map to four key IT areas: data and network security, data quality, operational and financial transparency, and record retention and accessibility," says

Matthew Josefowicz, manager of Celent痴 insurance group and author of the report. "These are the same IT issues required for key business initiatives like improving cross-selling, pricing and underwriting ability, business intelligence and strategic planning, and multi-channel distribution."

Celent痴 report recommends that insurers recognize the common ground between compliance IT issues and business IT issues, and understand that compliance and IT departments can be natural partners, not antagonists. By banding together, they can make a stronger case for badly needed infrastructure improvements that business is often hesitant to sponsor on its own, improving each department痴 efficiency while creating business value across the enterprise.

The 20-page report contains five figures and four tables. A table of contents is available

here.

of Celent Communications' Property/Casualty Insurance and Life/Health Insurance research services can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

        

Send mail to info@celent.com with questions or comments about this Web site.

 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

New York, NY, USA November 4,  2004

The Virtuous Cycle of Compliance & IT

Return to report Abstract

 

EXECUTIVE SUMMARY 3
INTRODUCTION 4
REGULATORY ENVIRONMENT OVERVIEW 5
  Sarbanes-Oxley 5
  Gramm-Leach-Bliley 6
  HIPAA 6
  USA Patriot Act 6
  State Insurance Regulations 7
  Other 7
APPROACHING COMPLIANCE 8
  Statute-Based vs. Issue-Based 8
  Top Six Regulatory Issues 8
  Potential Savings in IT 10
MAPPING COMPLIANCE AND IT 11
COMPLIANCE IT AND BUSINESS IT CHALLENGES ARE ONE 13
EXAMPLES 15
  Enterprise Reporting 15
  Centralized Quote and Issue 15
  Automated State Filings 15
A VIRTUOUS CYCLE? 16
CONCLUDING POINTS 17
  For Insurers 17
  For Solution Providers 18
OBJECTIVITY & METHODOLOGY 19

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