2014 was a challenging and uncertain year for insurance regulation. From unethical annuity sales tactics to stress tests and SIFIs to pension law to health care reform, it was a year of increased scrutiny of the industry and ongoing examinations of current regulations.
And it seems this year is not much different. 2015 ushers in new rules and modified requirements that could significantly affect how companies operate. Deloitte’s annual “Top Regulatory Trends for 2015 in Insurance” claims that “Regulatory bodies in the U.S. and abroad have been significantly expanding their compliance, oversight and enforcement activities in recent years, and this is a trend which is expected to accelerate and add to rule-making and overlapping of regulatory roles.”
To read which regulatory trends Deloitte ranks as most important for the insurance industry, read on.
5. Focus on annuities
It may come as no surprise to some that annuities make the list of important regulatory trends this year. With the product’s complexity, the potential for misunderstanding and misrepresentation from agents and brokers increases. According to Deloitte, there is a strong possibility that interest rates will remain historically low for the foreseeable future, which could make it difficult for insurance companies to deliver the anticipated payment streams without having to hit policyholders with unexpected premium increases. “These factors are prompting regulators to increase their scrutiny of annuity products and how they are advertised, marketed and sold,” the report states.
One year ago, we ran a story about a pair of brokers, an investment advisory firm and several others involved in a variable annuities scheme to profit from the imminent deaths of terminally ill patients in nursing homes and hospice care. The individuals involved, Michael A. Horowitz and Moshe Marc Cohen, also made our annual Rogue’s Gallery list.
Insurers can look for more regulation regarding annuity sales this year.
4. Cyber security threats
The memory of the Anthem hack is still fresh in our minds: A cybercrime that exposed the personal information of 80 million current and former members, as well as Anthem employees themselves. And the news worsened for the health insurance company when it was reported just this week that the U.S. Office of Personnel Management warned Anthem in September 2013 that a “gateway for malicious virus and hacking activity that could lead to data breaches” existed.
Insurance companies will likely continue to be a target of cyber criminals worldwide since the databases of such companies are rife with personal information of millions of individuals. Deloitte notes that “as insurers expand their footprint to mobile devices and the internet — and as the value of customer data continues to rise — it won’t be long before the insurance industry is under assault.”
Regulators have found widespread use of antiquated security systems and underinvestment in IT throughout the insurance industry. As a response, regulators are beginning to raise the bar on cyber security in insurance. For example, the NAIC established a Cyber Security Task Force at its most recent meeting.