Insurance Compliance: The Reality
Insurance is one of the most regulated industries in North America. Every state and province has its own insurance department with its own rules, and they all expect you to know every detail.
The stakes? Fines, license suspension, or worse—losing carrier appointments because you couldn't prove you followed the rules.
But here's the thing: most compliance failures aren't because people don't care. They happen because tracking everything manually is humanly impossible.
Types of Insurance Audits
Know what you're dealing with:
Market Conduct Examinations
State regulators checking how you treat policyholders. They'll look at your underwriting practices, claims handling, advertising, and complaint resolution. These can be triggered by complaints, industry sweeps, or just random selection. Fun.
Financial Examinations
For carriers: regulators making sure you can actually pay claims. They'll dig into reserves, investments, reinsurance, and actuarial assumptions. Typically every 3-5 years, but don't get comfortable.
Carrier Audits (for MGAs)
Your carriers want to know you're following the binding authority agreement. They'll check underwriting decisions, premium handling, claims authority usage, and whether you're staying in your lane. Usually annual. Sometimes surprise.
Multi-state reality check: What's legal in California might be prohibited in Texas. Operating in multiple states means tracking multiple rule sets—and regulators don't accept "I didn't know" as an excuse.
Key Compliance Areas
Licensing
Everyone touching a transaction needs proper licensing. Company licenses, producer licenses, adjuster licenses, MGA registrations—and they all expire on different dates in different states. Miss one, and you're doing unlicensed business. Regulators love that.
Rate and Form Filings
Most states require approval before you use rates or policy forms. Rates must be adequate, not excessive, and not unfairly discriminatory. Forms must meet state requirements. File wrong, get fined. Use unfiled forms, get fined more.
Claims Handling
Strict timelines for everything: acknowledgment, investigation, decisions, payments. Each state has its own rules. Miss a deadline, and what was a claims issue becomes a compliance issue.
Data Security
You're holding sensitive data. State and federal regulations require specific security controls, breach notification procedures, and privacy protections. This isn't optional, and the penalties are getting steeper.
Pre-Audit Checklist
Technology That Actually Helps
Modern compliance isn't about bigger spreadsheets. It's about systems that track requirements automatically:
Automated Monitoring
Platforms that track regulatory changes across jurisdictions and alert you when something affects your business. Because reading fifty state bulletins every week isn't a job—it's a nightmare.
Workflow Enforcement
Systems that prevent non-compliant transactions at the point of sale. Can't bind in a state where you're not licensed if the system won't let you. Can't use unfiled rates if they're not in the rating engine.
Audit Trail Creation
Every transaction logged, every decision documented, every timestamp recorded. When the auditor asks "show me," you don't scramble—you export.
Opensure's approach: Compliance controls built into the workflow. Audit trails created automatically. Your data stays in your systems, but every action is logged and exportable. When the auditor calls, you're ready.
Common Compliance Failures
Learn from others' mistakes:
- Unlicensed transactions: Binding risks in states where your license lapsed. Easy to do, expensive to fix.
- Rate deviations: Charging rates different from filed rates without proper documentation. Regulators check.
- Claims delays: Missing statutory timelines for acknowledgment or payment. Every state tracks this.
- Documentation gaps: Can't prove you followed the rules if you didn't document it. "We always do it right" isn't evidence.
- Advertising violations: Making claims you can't support. Using materials that weren't approved. Social media counts.
Building Compliance Into Your Culture
Technology helps, but culture is what makes compliance stick:
- Leadership buy-in: If compliance is "someone else's job," it's nobody's job. Executives need to care.
- Clear procedures: Written policies that people actually read and follow. Not a 200-page manual nobody opens.
- Regular training: Requirements change. People forget. Training keeps everyone current.
- Ongoing monitoring: Don't wait for the audit. Check yourself quarterly. Find problems before regulators do.
- Quick remediation: When you find issues, fix them fast. Document the fix. Show you care.