The regulatory burden: navigating compliance challenges in the insurance sector
Understanding the regulatory landscape
The insurance industry stands at a critical juncture, grappling with an increasingly complex regulatory environment that threatens to overwhelm both operational efficiency and long-term strategic focus. What was once a manageable area of business has now grown into a significant challenge, demanding more resources, more expertise, and more agility than ever before.
Insights from a recent industry roundtable, facilitated by Charlotte Firth, Chief Commercial Counsel at Marsh & Mercer, reveal the mounting pressures faced by organisations across the sector. As firms seek to meet regulatory obligations, remain commercially competitive and deliver value to customers, many are questioning how sustainable the current regulatory trajectory really is.
The Escalating Cost of Compliance
One of the most pressing issues for insurance providers is the rising cost of compliance. Over the past few years, these costs have grown dramatically, becoming a significant burden on both operational budgets and long-term planning. Many in the industry are reporting that direct compliance costs have surged by an eye-watering 40% since 2019.
Regulatory expenses now consume up to 8% of broker commissions and fees — a figure that many firms feel is unsustainable, particularly in an environment where margins are already under pressure. To manage these obligations, major organisations are investing heavily in compliance infrastructure. Some have established entire teams dedicated solely to regulatory monitoring and response, often outnumbering those seen in other global financial sectors.
This steep rise in cost is not just financial — it also represents a drain on time, talent, and attention. Resources that could otherwise be focused on innovation, growth, or customer service are increasingly absorbed by compliance activities.
The regulatory documentation Deluge
A key contributor to this growing burden is the sheer volume of regulatory output. The Financial Conduct Authority (FCA), for example, released an astonishing 236 separate publications in 2023 alone. These included guidance notes, discussion papers, thematic reviews, and consultations — all of which require thorough review and, where applicable, implementation.
This documentation deluge creates a real challenge for compliance teams. The process of interpreting, assessing, and responding to each new publication can be laborious and time-consuming, especially when deadlines are tight and requirements are unclear. It also introduces a constant state of flux that makes it difficult for firms to feel fully “in compliance” at any given moment.
The result is a working environment where compliance feels more like a moving target than a well-defined standard — increasing the risk of both oversight and burnout.
Global Regulatory Complexity
For multinational insurance firms, the situation becomes even more complex. Regulatory frameworks differ significantly across jurisdictions, from the risk-based approach of the European Union to the more fragmented systems in the United States and the evolving models across Asia.
This diversity demands a level of agility and sophistication that can stretch compliance teams to their limits. Firms must not only understand each jurisdiction’s rules but also how those rules interact with each other. This often requires bespoke strategies for each region, along with investment in cross-border legal expertise and adaptable internal policies.
With growing globalisation and digital connectivity, regulatory bodies are also increasing their expectations for coordination across entities. This adds yet another layer of complexity and cost.
Operational Resilience in a Regulatory Minefield
Modern regulatory expectations extend far beyond traditional compliance checklists. Today’s insurance companies are also expected to demonstrate robust operational resilience — the ability to continue critical operations during times of disruption, whether due to cyber incidents, supplier failures, or economic shocks.
This has introduced a broad range of new focus areas for compliance teams, including:
- Technological infrastructure and cybersecurity standards
- Third-party risk management and vendor due diligence
- Scenario testing and crisis response planning
- Data protection and ethical governance
These are not “bolt-on” issues; they require integrated strategies that touch every part of the organisation. And for many, this shift marks a fundamental transformation in how risk and compliance functions are conceived and managed.
The Human Element of Compliance
The human cost of compliance cannot be ignored. Legal and compliance professionals are increasingly under pressure to stay ahead of regulatory developments, interpret dense guidance, and ensure implementation — all while supporting the commercial goals of the business.
This dual responsibility can create real tension, as teams work to be both guardians of regulatory integrity and enablers of agile, customer-focused decision-making. Burnout, recruitment challenges, and retention issues are becoming more common in this space, particularly as skilled compliance professionals are in high demand across sectors.
Strategic Approaches to Regulatory Compliance
To navigate this challenging environment, successful organisations are embracing strategic, forward-thinking approaches. These include:
- Proactive regulatory engagement – building open lines of communication with regulators and staying ahead of consultations
- Risk-based compliance strategies – prioritising areas of highest impact rather than applying blanket policies
- Continuous professional development – ensuring compliance staff are equipped to respond to new and emerging challenges
- Technological investment – leveraging tools that enhance automation, monitoring, and reporting
- Strategic dialogue with regulators – collaborating to shape proportionate, effective regulation
The Technology Factor
Technology is playing an increasingly pivotal role in managing regulatory risk. Emerging solutions powered by artificial intelligence and machine learning are beginning to transform compliance workflows — from automated document analysis to predictive risk modelling and anomaly detection.
These tools offer the potential to streamline labour-intensive processes, reduce human error, and free up compliance professionals to focus on higher-value strategic tasks. However, successful implementation requires both investment and cultural readiness, as well as a clear understanding of regulatory expectations around technology use.
A Call for Proportionality
Amidst all these pressures, there is a growing industry consensus: the current regulatory framework may need recalibration. While robust consumer protection and systemic stability must remain top priorities, there is increasing recognition that the burden on firms must be proportionate to the risks being managed.
A more balanced, outcomes-based approach — one that supports innovation and growth without compromising standards — could help the sector move forward more sustainably.
Conclusion: Turning Compliance into Competitive Advantage
While the regulatory burden is undoubtedly significant, forward-thinking insurance organisations are beginning to view it as a potential competitive advantage. Those that can embed compliance into their strategic planning — supported by the right talent and technology — will be better positioned to differentiate themselves in the market.
Ultimately, the future belongs to firms that can balance regulatory rigour with agility, resilience, and innovation. By doing so, they won’t just meet compliance requirements — they’ll lead the way in defining what excellence looks like in a regulated world.
