Key takeaways from IRES Foundation 2024 National School on Market Regulation

Our U.S. Head of Audit & Advisory, Robert Sherman, recently attended the IRES Foundation 2024 National School on Market Regulation in San Diego, USA. Here are his three key takeaways from the event…

Insurers needs to be clear on their MGA relationships

To ensure market conduct is being met, it’s vital the relationship between the insurer and MGA is clear. When an insurance company gears up for review, it must be clear who does what, to understand the MGAs involvement in market conduct and responding to requests. The MGA must therefore be on notice when an exam is called.

It’s also important to ensure there is thorough and complete documentation, too. Too many companies don’t know who has access to what information or data. Getting ducks in a row will make a big difference when an MGA is then made aware there is a formal enquiry. There should be a contractual agreement between the two parties to gain access to carrier information. The carrier may be ‘outsourcing duties’ to the MGA, but the carrier remains responsible for the data and sharing with regulatory authorities when requested.

Third parties (MGAs, TPAs) are an extension of a carrier, who are responsible for their vendor

It’s important for carriers to take full responsibility when auditing, including adopting proactive auditing and reporting of issues.

Carriers may outsource or vend aspects of their business but, ultimately, the carrier is responsible for compliance. They must have a clear sight of what their vendors are doing, how data is maintained, and how such things as artificial intelligence (AI) may be utilized in diverse processes..

For example, if a carrier is vending out its claims, they must have the ability to access claims files, and must make sure they get information from administrators. Ultimately the carrier is the one that is licensed.

Carriers must also be proactive. When something is found, report it as soon as possible along with justification and explanation. It’s important to also consider controls that can be put in place to prevent this from happening in the future.
An uptick in self reporting will lead to an improved relationship with companies and regulators.

Insurers must be flexible as AI and its regulation develops

AI is evolving fast, as is the regulation around it. A degree of flexibility will need to be in place from insurers to ensure they can adapt when needed.

Regulators will want to know what AI processes are in place in the context of market conduct, and will want to understand what companies are doing – for example, understanding potential gaps. It is recommended that insurers sit with regulators and explain the processes they have in place, showcasing how the data is being used.

Insurers need to begin sooner than later to implement governance frameworks and be flexible as AI and its regulation develops. If there’s one word I would repeat to insurers, it would be Document; Document; Document!

Finally, insurers need to be able to explain their use in understandable terms. Cumbersome explanations or jargon just won’t cut it!

These insights from the IRES Foundation 2024 National School on Market Regulation event underscore the critical importance of clarity and responsibility within insurer-MGA relationships, as well as the necessity for thorough oversight of third-party vendors, and the imperative for insurers to adapt and remain flexible in the face of evolving AI technologies and regulations.

There are proactive steps that insurers can take to keep pace with these rapidly evolving dynamics, and ensure they are maintaining compliance best practice at all times. These include comprehensive documentation, proactive auditing, and transparent communication with regulators: a powerful trio that combined will market conduct and compliance practices. As the industry continues to navigate the complexities of market regulation, I hope these key takeaways from the evolving conversations in our market serve as helpful guidance for insurers striving to maintain integrity and effectiveness in their operations.

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