Regulatory Reporting Providers Help Insurers Focus on Strategy

Regulatory Reporting Providers Help Insurers Focus on StrategyProperty/casualty insurers work with regulatory reporting service providers to ensure data is in the proper format for regulators, advisory organizations, and statistical agents. Regulators use this data to assess insurer rates and rating plans and understand emerging issues. Insurers benefit from better predictions of loss costs and loss experience in addition to the benefits of outsourcing the work to service providers.

Insurer reporting is compulsory, and vended core solutions often do not have the required regulatory reporting capabilities. Many insurers that are transforming their core systems look to reporting service providers to simplify their reporting processes, especially during core system implementation.

Outsourcing this capability to a service provider simplifies the technical environment, reduces the scope of the in-house core system implementation, and allows the insurer to focus on delivering differentiating capabilities. While in-house solutions are typically considerably less expensive, leveraging reporting partners can be very beneficial. Service providers vary in terms of the type of provider and scope (e.g., report types, lines of business, states).

Types of Providers

Service providers include actuarial firms, advisory organizations, insurance technology service and solution providers, and statistical agents. Some firms play multiple roles: Verisk Analytics, a service and solution provider, acquired ISO, an advisory organization and statistical agent.

Actuarial firms accept data from insurers, validate it, and handle report submission as well as monitor applicable circulars and publications to guarantee insurers comply with the latest requirements from regulators. They provide consulting and other services for litigation, pricing, product development and maintenance, reserving, valuation, rate analysis and review (including competitor rate comparison), and rate filings.

Advisory organizations develop standardized policy forms and endorsements for insurer use.

Service and solution providers take on the burden of regulatory reporting for insurers (freeing up resources) or provide solutions that simplify data collection and ensure it is in the proper format. Most providers will offer solutions to members or customers in support of their reporting service offerings, rather than offering standalone vended solutions.

State insurance commissioners designate statistical agents to collect data from insurers and generate reports based on that data to fulfill insurer statistical reporting obligations.

Types of Reporting

Statistical Reporting

Applicable regulations vary, but all US states and territories require property/casualty insurers to file claims and premium data with statistical agents. These agents then aggregate the data so that regulators can ensure rates comply with statutory requirements and monitor the marketplace.

Statistical reporting service and solution providers offer documentation and templates for reporting, analytical and technical support, and various tools for validating data and tracking submissions. They may also work with insurers to develop statistical reporting processes.

State Bureau Reporting

State insurance bureaus have requirements for form, rate, and rule filings from insurers. They publish bulletins and circulars outlining new requirements. State bureau reporting service and solution providers monitor these bulletins and circulars and file on behalf of clients or provide solutions for insurers to do so themselves.

State Data Calls

The NAIC, state insurance departments, or trade associations may request specific data from insurers to understand emerging issues. State data call service and solution providers monitor state requirements and submit requested data on behalf of their clients or provide solutions for insurers to do so themselves.

Market Conduct Reporting

State insurance departments periodically perform market conduct examinations to confirm that domestic insurers are engaging in fair business practices and complying with applicable regulations. These examinations follow NAIC procedures and result in publicly posted reports from the regulators, incorporating regulators’ findings and corrective action plans and examiners’ notes. Market conduct service and solution providers communicate with examiners and provide audit trails, document management, reporting, task management, and additional functionality.

E&S Reporting

States assess surplus lines taxes and fees (e.g., stamping fees, fire marshal taxes) and require the use of state-specific stamp templates and provision of supporting documentation. States also require policy filings and have specific requirements for report formats and supporting documentation. E&S reporting service and solution providers monitor state requirements and collect and validate data before submitting policy and tax reports and payments.

State Tax Reporting

States assess taxes based on the gross premiums written by insurers that can be allocated to risks in those states and, in some states, income taxes and retaliatory taxes (i.e., taxes levied on insurers conducting business in a state other than their domiciliary states). Many states offer offsets, crediting premium tax payments against income tax payments or vice-versa, and offsets that credit payments into state residual mechanisms (e.g., state guaranty funds). State tax reporting service and solution providers monitor state requirements and collect and validate data before submitting tax filings and payments.

The Value Proposition for Using Service and Solution Providers

As insurers’ regulatory and compliance workload increases, many turn to service providers to outsource processes entirely or solution providers to automate processes for increased accuracy and efficiency. As with any service or solution provider, careful vetting of capabilities and client experience is called for.

Read Aite-Novarica Group’s report Regulatory Reporting: Overview and Prominent Providers for an in-depth look at provider capabilities in this space. Please feel free to reach out to me ([email protected]) or my co-author Martina Conlon ([email protected]), Head of Property and Casualty Insurance, with any questions.

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