As the regulatory landscape in the insurance industry continues to grow in complexity, compliance remains critical. Meanwhile, insurance is undergoing a digital revolution with producers leveraging new technologies to cut costs and grow sales.

Routinely overlooked, compliance is an area ripe for innovation. While it has often been considered a costly and tedious—but necessary—issue, compliance can offer valuable opportunities to increase profitability.

In 2023, the industry must innovate its compliance management processes to maintain and increase its competitive advantage. Here are three key trends they should utilize:

1) The art of automation. Nonresident insurance licenses now account for three times the volume of state resident licenses, according to the National Association of Insurance Commissioners (NAIC). With agents drastically increasing the number of active nonresident licenses they hold, the challenge of being compliant in multiple states has led to agencies and carriers facing tens of thousands of dollars in fines every year.

For many, compliance used to be as simple as a sticky note reminder on their desk. Now it can be an automated process that begins at onboarding and lasts throughout their entire career. Hosted on the cloud and fully integrated into their organization's other management systems, modern compliance is empowered by artificial intelligence (AI) and machine learning to increase productivity by automatically delivering notifications and managing workflow.

For example, appointment data holds sensitive personal information, so producers must ensure that this data has the proper safeguards and cannot be compromised. Also, application programming interfaces (APIs) have been adopted so that compliance data can be imported and exported to other platforms, such as an agency's HR system.

These innovations reduce the time employees will spend on tedious administrative tasks, giving them more time to focus on sales and gain a competitive edge over their peers.

2) The case for data analytics. Insurance is recognizing the potential to leverage compliance data for strategic insights. Agencies can now analyze years of archived compliance data to track day-to-day activities and build metrics around fundamental questions such as, “Which producers are generating the most business for us?" “Who do we quote the most business with?" and “Which salesperson is the most productive?"

With these questions answered, agencies can make strategic business decisions that are powered by real-time data and insights.

3) “Just-in-time" appointments. As the total number of licensed producers has increased, carriers also face an avalanche of appointing filing fees and administrative tasks. Many carriers appoint agents even though they likely have a significant percentage of agents who will never generate any business for them. Thus, they have increasingly turned to “just-in-time" appointments (JITs).

JITs allow carriers to wait on fully executing an appointment until the agent has written business in the state. This allows them to have proof that an agent can generate revenue before having to file any paperwork or pay any fees.

However, the deadlines for a JIT can be tight. In most states, carriers have anywhere between 14 to 45 days to file after their agent has submitted their first piece of business. Carriers will need to have the proper compliance management tools and processes in place to take full advantage of the benefits that JITs provide.

Proper compliance management is proving to be much more than a mundane back-office function, and a real key to profitability. New solutions powered by technology such as AI, cloud computing, APIs, and data analytics are increasingly changing the way compliance departments operate, giving them strategic advantages.

The insurance industry can no longer overlook the importance of compliance and needs to embrace new compliance technology as the heartbeat of their organizations.

Allister Yu is the senior vice president of operations at Rhoads Online, a provider of compliance management software and services for insurance carriers, agencies and adjusters.