Compliance is a constant priority for every insurance business in the UK – and the task of managing it is only getting more complex as the industry embraces digitisation.
While new systems and AI tools offer the promise of higher productivity and genuine transformation, they also create new vulnerabilities and potential entry points for cyber criminals. It’s down to IT leaders and senior managers to keep their data and infrastructure protected at all costs.
To stay ahead, insurers should be aiming to adopt proactive strategies, ensuring robust cyber security measures are in place while building a culture of compliance that plays out on a daily basis. Regular training, sophisticated encryption and real-time monitoring are crucial to keep risks in check and maintain trust in an increasingly digital landscape.
The biggest compliance risk factors for insurance
- Keeping pace with evolving regulations – The regulatory landscape in insurance is constantly shifting across both local and international jurisdictions. Companies must continually monitor changes in guidelines published by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), and aim to adapt quickly. Falling behind can result in non-compliance, fines and significant reputational damage.
- Data protection – Insurance firms are responsible for safeguarding vast quantities of sensitive client data and employee information. Strong encryption measures and access controls are crucial to ensure this information doesn’t fall into the wrong hands. Data quality is also a key factor, as inaccurate or incomplete data can quickly lead to issues with reporting and system use.
- Partnering with the right vendors – The support of third-party vendors is essential to supplement technical capabilities and expertise, but it can also lead to a bigger surface area of systems that aren’t within direct control of your IT team. Every partner should be thoroughly vetted from a risk perspective to ensure they adhere to the same high standards of data security and regulatory compliance. Firewalls and system breakers should also be in place to protect your business in the event of a third-party breach.
- Staff training – Every employee in your firm should be well-versed in compliance protocols. Regular training sessions are important to keep staff updated on the latest best practices to avoid phishing and social engineering tactics. Without proper education, human error can lead to costly breaches or regulatory penalties.
- Expanding systems – As businesses grow and adopt new technologies, their systems become more complex. This expansion can create gaps in compliance if not managed carefully. Implementing scalable solutions and conducting regular risk assessments during upgrades are vital to maintain compliance across all platforms.
- Policies and procedures – Clear, well-documented policies are the backbone of compliance. They provide a framework for employees to follow and ensure consistency in operations. Reviewing and updating these policies to reflect current regulations and industry best practices is the only way to maintain a strong approach to compliance.
What does a good risk management framework look like?
A reliable risk management framework is the foundation on which all systems, processes and controls are built. It should balance the need for consumer protection with ongoing compliance to regulatory standards – here’s a quick breakdown of the key components:
Compliance with regulatory guidelines
For UK firms, adhering to regulatory expectations set by the FCA and PRA, as well as other international governing bodies, can be a challenge. Guidelines are continually evolving and a solid understanding of new developments is essential to cover all bases and limit the risk of non-compliance. It’s a good idea to proactively test workflows and systems with these guidelines in mind to make sure they are fulfilling obligations.
Regular audits
Between risks related to pricing, claims or policy terms, exposure to market fluctuations, data protection or risks from there’s a lot for insurance firms to stay on top of. Internal processes and IT systems should be audited on a regular basis to assess risks and highlight issues and inefficiencies before they impact performance or security.
Governance and culture
Establishing a strong governance structure with defined roles and responsibilities is important to ensure accountability for different aspects of risk management. Governance boards often prove valuable because they bring together safety perspectives from different areas of the business – tech, legal, operational and beyond.
The impact of AI on compliance
AI tools are transforming the way business is done in the insurance world – more on this here – but it also presents new risk and compliance challenges for IT teams to deal with.
There are major cyber security risks for any systems that rely on sensitive data, especially when integrated into a centralised IT infrastructure without adequate protection in place. This can make AI tools a prime entry point for cyber attacks, potentially leading to data breaches, privacy violations and regulatory fines.
Ethical risks can arise from biased algorithms that cause unfair or discriminatory outcomes. This has caused issues for businesses using AI as part of their talent acquisition processes, where certain biases towards age or gender based on historical data are being perpetuated. Â
Legal and compliance risks involve penalties for mishandling data or violating privacy standards, with cross-border regulations like GDPR adding further complexity. Robust governance is vital to avoid legal action and ensure compliance.
Tools to support your staff
Leveraging the right technology can support your staff by streamlining processes, enhancing accuracy and ensuring regulatory compliance. Here are some of the best tools to help you:
- Risk assessment software and GRCs – Having digital records and a clear audit trail of risk assessments is a huge benefit when it comes to demonstrating compliance, especially in the event of a breach or audit. Some firms benefit from investing in an advanced governance, risk and compliance (GRC) platform to combine risk management and auditing capabilities.
- AI tools and virtual assistants – AI assistants like Microsoft 365 Copilot can help staff quickly summarise lengthy regulatory guidelines into actionable insights. They also make information retrieval and analysis of large data sets much easier.
- Cyber security and data protection software – Robust cyber security measures, firewalls and encryption functions are fundamental to keep your data protected. This is especially important when working with third-party vendors, so you can quickly ringfence your internal network if another part of your data supply chain is breached.
- Climate and ESG risk platforms – Tracking and assessing environmental, social and governance risks is important to manage fluctuations in weather and other environmental risks.
The reality of risk and compliance – IQUW
Tawhid Rahman, Chief Architect at IQUW
“The reality for us is that 85% of our systems are hosted on third-party infrastructure. That’s a huge attack surface that’s largely outside of our direct control. We’ve had to get really sophisticated with our network engineering and access controls. Our API-oriented services, for instance, all sit behind an Azure firewall so we can quickly shut down access if one of our partners is compromised.
“We also have to stay on top of constantly evolving regulations and policies. With operations spanning the globe, we’re dealing with well over 20 different international sanctions regimes. It’s physically impossible for a small team to keep up with all of that manually. That’s where AI and automation comes in handy, and we can use language models to summarise those complex documents and flag potential issues before our compliance analysts dive in.”
