The Danger of Delayed Compliance and Steps You Can Take To Remediate Your Risk

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In December, we published “A 2021 Regulatory Outlook: 4 Critical Areas for Agents and Advisors”, a blog post highlighting the compliance risks we could face in 2021. One of the primary purposes of that blog was to relay the fact that the regulatory environment for our industry is changing – perhaps more rapidly than at any other time in recent history – and these changes are creating substantial risk for producers. Add to this a new presidential administration that appears to embrace regulation and enforcement to a greater extent than the previous administration, and we are likely to see the pace of change continue or even accelerate for agents and advisors.  As a result, state insurance regulators will likely feel pressure to keep pace and demonstrate that they are effective at enforcement.

Unfortunately, some producers appear to have chosen to dismiss their compliance risks. Let’s review some of the commonplace reasons for delayed compliance and steps to remediate your business risk.


Reasons for Compliance Delay: Challenge of Staying Informed

The regulatory landscape is constantly evolving, and it can be challenging to stay current with all the new requirements. Faced with this challenge, some people choose to stop trying to keep up with all the new laws and regulations and have a lack of awareness/lack of training regarding what is required. This approach puts the entire business at risk.  Regulators are inclined to respond more harshly to licensees who have not even attempted to comply with applicable laws and regulations. Further, insurance carriers must evaluate the risk presented by their distribution partners and are more likely to take negative action against those who present a higher degree of risk.

Risk Remediation Step: 2+2 Method

Many people feel overwhelmed if they try to keep current on newly proposed regulations, regulations that have become effective in individual states, emerging best practices, etc.  Instead, try the 2 plus 2 method.  Find two industry publications that you enjoy (for example, Insurance News Net) and spend a few minutes each week reading about regulations that have become effective and affect your business.  To supplement your reading, find two organizations that will provide you with more detailed and practical guidance.  One great resource is your marketing organization.  They have access to information from insurance carriers and industry trade organizations that they can share with their producers.  Another great resource is a seasoned compliance firm with experience in your industry.  Some of these firms will add you to their email list so you can receive specific updates on new regulations to help keep you current.


Reasons for Compliance Delay: Overconfidence or Over-Estimation of Abilities to Address Risk

Individuals with a lot of experience in our industry may be overconfident in their ability to address compliance risk. Compliance with regulatory requirements involves more than just trying to do the right thing or putting the consumer first. Unfortunately, there are often specific actions that are required that are not intuitive. Good intentions are not the same as achieving compliance.

Risk Remediation Step: Complete a Compliance Self Assessment

Challenge your belief that you understand and have effectively managed your compliance risk. View our Compliance Self Assessment blog post and complimentary compliance checklist. Go through the Self Assessment and answer honestly.  Don’t risk the practice you have worked so hard to build by ignoring potential risks that could have severe consequences.  Another challenge you can give yourself is to have one piece of advertising review by a compliance expert.


Reasons for Compliance Delay: Procrastinated Action

Some people understand regulatory requirements but have chosen not to comply or may be putting it off and have not taken any action yet. If a licensee understands the requirements but has not followed through and taken steps to comply, regulators are likely to see that as willfully choosing not to comply.  As you can imagine, that is not likely to lead to a good outcome for the licensee.

Risk Remediation Step: Create Your Compliance To-Do List Prioritized to Your Risk

Create a “to do” list of items that you know or think you should do, but have been putting off.  Consider the items on your list and then determine which of them could put you out of business.  While items such as looking for a new CRM or filling out contracting paperwork for another insurance carrier are important, ask yourself if anything is more important than staying in business.  Managing your compliance risks are like the foundation of a house.  If the foundation isn’t solid, it’s dangerous to continue building.



Failure to adequately address the risks presented by laws and regulations can have serious consequences to your business.  As I recently discussed with a client, some seemingly harmless activities are felonies in many states. (Examples include, but are not limited to, having an unlicensed person perform activities that require an insurance license or an insurance-only licensed producer recommending that a client use funds from their 401k to purchase an annuity.)  You haven’t spent time and energy building your practice only to face criminal charges, lawsuits, reputational damage, loss of clients, loss of future clients, loss of carrier contracts, loss of your insurance license, and the loss of your financial future over something that could likely be remedied quickly and easily.

As Warren Buffet once said, “It takes 20 years to build a reputation and 5 minutes to ruin it.  If you think about that, you’ll do things differently.”

Protecting your business in this time of increasing regulation is critically important.  Compliance is often easier and less expensive than you may think.  Like with so many other things, it pays to not procrastinate when it comes to meeting regulatory requirements.  Want to work with a Compliance partner? Explore our tips on how to choose a compliance partner in our April blog post: Choosing a Compliance Partner (and why you should have one).

Questions about this topic or any other compliance issues?  The professionals at DMI stand ready to assist you with all aspects of your business, including compliance.  Part of DMI’s commitment to your success includes a partnership with Summit Compliance Group, LLC, a leading provider of compliance services for the financial services industry.