The future of regulatory compliance for the insurance industry will require leaders to find balance between opportunity and obligation. Explore how insurance leaders can stay on top of regulatory shifts in 2024, including artificial intelligence (AI) governance and the impact of climate change.
An overview of the topics presented in our 2024 regulatory outlook
Regulatory oversight of AI use
As the insurance industry continues to use AI to drive value, risk managers should seek to find balance between rewards and regulatory expectations. For example, Colorado’s regulatory framework for insurers—designed to help prevent bias and discrimination in AI models—is set to be fully effective in 2024. This, along with the possibility of regulatory frameworks from the federal government, comes as AI and machine learning are increasingly being used to manage claims, underwriting, and other processes throughout the insurance industry. To stay ahead, insurance leaders should adapt their compliance strategies to grow their AI capabilities while also mitigating regulatory risk.
Safeguarding solvency
Insurance regulators are exploring and implementing new compliance frameworks designed to maintain the solvency of insurers and protect consumers. Multiple subgroups within the industry, including life and homeowner insurers, should keep regulatory nuances in mind as they strive toward compliance-driven advantage. In addition, federal regulators’ decisions to potentially classify insurers as systemically important financial institutions—a distinction that comes with heightened regulatory oversight—could play a role in operations across the industry. Insurance organizations should forecast solvency requirements to capitalize on opportunities in the future.
Consumer protection and care
As consumers continue to explore insurance options, regulators are creating ways to help ensure access and inclusion while managing threats along the way. Consumer education opportunities are becoming a top priority to help share information on storm preparations, wealth generation, and retirement management. Furthermore, industry regulators are expected to further scrutinize third-party vendors’ access to consumer data and require proper documentation to show insurance product recommendations are made in good faith. Insurance regulators are looking to leverage oversight and education initiatives to help consumers make informed decisions.
Climate change and risk fitness
The impact of climate change is putting pressure on the insurance industry to build policies designed for changing environmental and weather conditions. The rising severity of wildfires, recording-breaking temperatures, and windstorms is creating an urgency for dialogue between insurers and regulators. While regulators are pushing for underwriting that addresses the increase in extreme weather conditions, some insurers are hesitant due to the financial loss that can come from policies in climate risk-prone areas. As the insurance industry continues to assess the impact of climate change on policy underwriting, compliance leaders should anticipate state and federal obligations and consider implementing requirements ahead of regulatory deadlines.
Put a premium on compliance resilience today
2024 will bring new regulatory considerations for the insurance industry. Collaboration between insurers and their regulators will be key to help forge a path toward a consumer- and tech-centered future as insurers work to navigate the impact of AI, risk-based capital expectations, and climate change to provide proper coverage for consumers.
Thefinancial services industry has much to prepare for in 2024. Discover howfinancial services organizations can integrate regulatory considerations intotheir strategy, keep pace with regulatory changes and enforcement priorities,and anticipate the regulatory impact on their current or future operatingmodel.
2024 Financial Services Regulatory Outlooks
If you are interested in learning more about the insurance industry, check out our 2024 financial services insurance outlook here.
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