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"Proactive engagement will enable insurers to determine sooner how competitors or new entrants might respond and then define the most appropriate aggressive or defensive strategies."


Steve Folkard, PA insurance expert

Unlocking competitive advantage from your compliance programme

Businesses in every sector must innovate to maintain their competitive position. This means differentiating to outpace, outmanoeuvre or outflank competitors.  For insurers, however, the increasing cost of running compliance programmes to meet new financial services regulations such as Solvency II means that the money available for innovation in areas such as marketing and product development is limited.

Given this challenge, how can insurers meet the cost of complying with changing regulations while identifying ways to innovate and gain a competitive advantage?

The answer is to use regulatory change as a stimulus for innovation, seizing the opportunity to involve thought leaders from multiple business areas to challenge ‘the way we do business round here.’

Get involved in shaping the regulations

Insurers should aim to become involved early on in shaping financial services regulation generated at EU level or beyond (as in the case of FATCA, the US tax legislation impacting foreign financial institutions) through trade bodies and local regulator lobbies.  This gives insurers the opportunity to understand and influence the impact the changes will have on markets and customers, and then develop a mechanism for early scenario planning to address the impacts. 

Proactive engagement will enable insurers to determine sooner how competitors or new entrants might respond (often before the competitors/new entrants have considered the question), and then define the most appropriate aggressive or defensive strategies.  For example, if change is set to drive consolidation, as has been the case to some extent with Solvency II, then early positioning with potential targets can provide significant advantage.

Formalise the structure that will provide innovative advantage

A small team equipped to scan the market for upcoming changes, keep abreast of regulatory announcements and ensure that the right subject-matter experts are engaged in analysis ahead of the competition is a critical part of the process. The core team needs to be supported by a virtual team of subject-matter experts, who are on call to explain the implications of any changes rapidly and in detail so that thought leadership can be developed.

Having an influential and vocal sponsor who is willing to own the structure and process is an effective way of managing the response to regulatory change across a large, diverse organisation. Without this, the interests of individual groups or functions often dominate debate and the major opportunities that span several areas can be lost amid parochial concerns, such as when tensions develop around the need to reduce a product’s speed to market so as to ensure compliance.

Share insight and lessons learnt across the organisation

Finally, insurers must decide how best to apply the insight they obtain. Sharing learning across borders on the impact of regulatory changes on distribution and marketing models, for example, provides the opportunity to shape strategy and model the optimal outcome for customers and shareholders at an early stage. Getting it right can help embed innovation that leverages mandatory change in the organisational DNA.  As a result, buy-in to the change process is stronger, ensuring better engagement, a faster response and tangible benefits that add value to the bottom line. A case in point is the ban on commission for advisers which comes into effect in the UK from the end of 2012 under the Retail Distribution Review.  This is now being considered by a number of European countries such as Holland and, as a result, a number of ‘early adopter’ insurers are increasingly moving towards harmonisation of disclosure across borders.

PA has the experience needed to unlock innovation in organisations by evaluating and redesigning structures and processes for addressing regulatory change. We have helped major clients in the banking and insurance sectors to shape effective programmes at speed across the regulatory, marketing and distribution functions, and have also worked with leading regulators in the UK and worldwide to shape their operations and enhance delivery.

To find out how PA can help you to unlock the innovation capability within your mandatory programmes, please contact us now.

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