“The proliferation of laws and regulations have made it more difficult for carriers, agents, brokers and third-party administrators to satisfy their (compliance) obligations. As a result, regulated entities will likely need to dedicate additional resources to compliance, including personnel and systems….”Companies can obviously make investments in infrastructure and training of compliance personnel, but the costs can be prohibitive for small- to medium-sized firms, and the results are less than certain. Compliance managers with significant experience are in high demand and, in certain parts of the country, command salaries in the low six figures. When companies decide to invest in training an employee in this area, they run the risk of losing the employee to a competitor once she has obtained the relevant expertise. For most small- to medium-sized insurance agencies, the individual responsible for licensing and compliance also bears other responsibilities and lacks deep compliance expertise because he (1) spends much of his time on non-licensing activities and (2) does not receive adequate education and training. License requirements vary by state, but they apply uniformly to all agency entities. This means that a shared resource (the outsourced license management partner) can assemble a best-in-class service that can be delivered to multiple agency clients on a more cost-effective basis than if the agency built the function internally. With critical mass and an exclusive focus on the licensing/compliance space, an outsourced partner can also stay current on developments across all jurisdictions while maintaining relationships with state insurance regulators to assist clients in avoiding regulatory issues and providing informed remedies when issues do arise. By assembling an experienced team of professionals, the outsourced license management partner can also marshal investments in systems and infrastructure to make license management more efficient and reliable. Today, most agencies track their licenses on a spreadsheet, which can result in errors, missed deadlines and other issues. A related issue faced by agencies is continuity of the licensing function. In-house compliance personnel have historically managed licensing and renewals on an ad hoc basis using Excel spreadsheets or conventional paper filing systems. These approaches may work on a very small scale, but they offer very little in the way of checks and balances because institutional knowledge is not easily translated within the organization and is often lost when the person assigned to manage compliance leaves. Because these firms typically lack robust systems and procedures, the compliance function is difficult to transfer to the new compliance manager. Does the function require significant management oversight? Agency managers should not need to concern themselves with day-to-day maintenance, while still having ready access to the status of their compliance programs so they can take advantage of business opportunities. See also: Insurance Coverage Porn Here are three case studies of how outsourcing has worked when put in practice by ACCEL Compliance, which specializes in providing outsourced service options for license management and compliance functions for insurance agencies, brokerages and TPAs. ACCEL's experience illustrates how these functions meet the key strategic criteria for outsourcing. CASE 1: Nationally Licensed P&C Brokerage A nationally licensed property and casualty broker specializing in large complex commercial and municipal construction projects lost its in-house compliance manager and needed to fill the role rapidly. The firm engaged ACCEL to take over the compliance function, saving the firm the time, expense and risk of recruiting a new hire. The firm’s president said it saved money and got increased visibility into its compliance function, while ACCEL seamlessly picked up its renewals. CASE 2: Nationally Licensed TPA A nationally licensed third party administrator of life, health and employee benefits for a number of the largest U.S. insurance companies and affinity programs also recognized benefits in outsourcing its license compliance function. The internal compliance manager said, “While we understand that licensing is necessary to our continued operations, it does not drive our business strategy. Worrying about lapses in licensing was an unnecessary distraction for myself and our executive management team." CASE 3: Small, Independent P&C and Surplus Lines Agency A small but growing independent property-casualty and surplus lines insurance agency based in the Southeast faced a rapidly expanding licensing footprint. As with many independent agencies, its founder and CEO had grown the business without adding significant administrative staff and the related expense. He recognized the opportunity to outsource his compliance and license management function and engaged ACCEL, which he said "frees me up to manage the growth of the business and drive revenue."
What Tasks Should Agencies Outsource?
Outsourcing can be an effective tool for maximizing resources — but only when certain criteria are met.