Gaining new authorization under President Barack Obama’s administration in 2009, financial services regulators will likely transform this sense of empowerment into a broad array of new rules and agencies, as well as stepped-up enforcement actions in 2010, according to regulatory compliance experts at Wolters Kluwer Financial Services, a provider of compliance, content and technology solutions, and services geared toward risk management.
As Congress debates additional legislation surrounding regulatory reform, and regulators conduct more stringent exams, the insurance and financial services industries are already feeling the effects. Adding to this regulatory burden, experts say, will be a soft U.S. economy that will likely lead many institutions to take more steps to better protect themselves and consumers from risk.
Kathy Donovan, senior compliance counsel for insurance compliance solutions at Wolters Kluwer Financial Services, expects a continued interest by regulators on the use of credit scoring information by insurance companies. Additionally, economic concerns, coupled with the focus on health care reform, will likely mean more fines in the health insurance sector, she said.
“Health insurers are under rigorous scrutiny and state regulators are working hard to show that they are policing those under their jurisdiction and protecting the consumer,” Donovan said. “As a result of state action, we’re seeing insurers make changes that benefit the consumer, such as trying to minimize the swelling ranks of the uninsured by changing eligibility requirements in health insurance policies.”
Kevin Byrne, senior regulatory consultant at Wolters Kluwer Financial Services, says the struggling U.S. economy has also elevated internal fraud threat concerns, since tough economic times can cause more employees at financial institutions to resort to fraud on top of the financial crimes already being committed against an institution by outsiders.
“The stakes are high for institutions since an employee with inside knowledge of the firm’s workings can drain tens, if not hundreds of thousands of dollars from legitimate customer accounts in a very short time,” said Byrne. “Many institutions are starting to realize that by investing in the people and technology up-front to stop internal and external fraud losses before they occur, they can actually improve their bottom line in the long run.”
Byrne said that as part of these efforts, some institutions are beginning to connect their anti-fraud and anti-money laundering investigation units. In doing so, he says both have access to more up-to-date customer information that they need to do their jobs more effectively.
The Obama Administration’s latest actions lend themselves to an atmosphere of legislative competition, says Edward Kramer, EVP of regulatory programs at Wolters Kluwer Financial Services. “There is a race in Washington D.C. right now. It’s a race by legislators and regulators to see who can do more to protect the American consumer.”
One of the leading consumer protection topics is privacy, and securities and banking industry regulators have even teamed up with the Federal Trade Commission to protect consumers, notes Ted Dreyer, senior attorney at the compliance and risk management firm. According to Dreyer, eight agencies across various financial services industries are working together to create one common privacy notice that institutions must share with all of their consumer customers.
“The new model privacy notice will likely be ready in 2010, and is intended to look a lot more like the nutritional labels you see on the side of cereal boxes, versus the text-oriented brochures that are given out now,” said Dreyer. “The idea is to create a cleaner, simpler explanation for the consumer of how an institution is protecting their personal information, and how consumers can exercise their rights to opt-out of some sharing of their information.”
This article can also be found at InsuranceNetworking.com.
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