Whether at European or national level, much legislation has been passed forcing the insurance industry to continuously implement comprehensive regulatory requirements. The German Life Insurance Reform Act (Lebensversicherungsreformgesetz – LVRG), Solvency II and the Insurance Distribution Directive (IDD) are just a few examples from the recent past. The EU General Data Protection Regulation (GDPR) came into effect in May 2018, which affects insurers in particular – after all, data processing and analysis are key components of an insurance business. Although the insurance industry has already committed itself to compliance with comprehensive data protection regulations in the form of the data protection code of conduct of the German Insurance Association (GDV), the provisions of the GDPR go even further.
But that is not nearly the end of the regulatory marathon:
From 2020, as part of the so-called EbAV II directive, corporate pension institutions will be subject to new requirements with regard to accounting, as the supervisory authorities of BaFin announced in their journal in February 2019. The regulation – which is based on a decision of the European Insurance and Occupational Pensions Authority (EIOPA) – became German law on 13 January 2019. For pension funds, this means expanded governance and information obligations and a bolstered risk management with regular risk self-assessments. Annual data is to be provided to BaFin for the first time in 2020 for 2019.
Whatever the new rules are called, the bottom line is that insurance companies have to be more transparent, comply with complex new rules and implement expensive regulatory requirements without deriving any competitive benefits from doing so. All this poses great functional and technical challenges for the industry, which is going through a difficult period in any case. Implementing these obligations requires extensive adjustments to IT systems and business processes. Furthermore, some insurers are using outdated IT systems that can only be expanded to include the new functionalities required by law requiring a great amount of time and at great expense. All this puts massive pressure on earnings and efficiency, and therefore on the competitiveness of companies.
How can this wave of new regulations be implemented on time and with legal certainty, but effectively and cost-consciously at the same time? It is only feasible with high-performance and state-of-the-art standard software solutions. The deployment of upgradeable standard software that can be easily integrated is an enormous relief, because this shifts most of the tasks created by implementing new regulatory demands onto the software provider. And there are significant cost benefits compared with an in-house development, because the costs are distributed across all users of the software. Insurance companies finally regain the room to manoeuvre they need to concentrate on tasks aimed towards differentiating themselves from the competition.
As the leading supplier of software and advisory services for the European insurance industry, msg life offers a range of standard solutions for life insurance companies and providers of company pension schemes that ensure the timely, complete and cost-effective implementation of regulations. The upgradeable software solutions are developed on an ongoing basis in cooperation with customers. The software solutions have already proved their worth in practice and are in operation at many well-known companies.
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