WHAT IS A BEST PRACTICE ANYWAY?

Following the law should be enough for a company, right? Any effort beyond that just costs money, right? Why should a company care about what other companies do that goes beyond “just following the law”?

Best Practices could be defined as any efficient (meaning benefits outweigh the costs) process or methodology that produces a desired result, and encourages continuous improvement. However, as used in the CLEARView, the parameters are more restrictive.

  1. The Best Practice goes above or beyond requirements of the law.
  2. The Practice itself is innovative or unusual and practiced by at least one company, but less than, say, 30% of the insurance industry.
  3. When a Best Practice either becomes a requirement of law or becomes commonplace in the industry, it ceases to be a Best Practice and becomes a Standard Practice.

A company that adopts Best Practices will have a commitment from top management to seek out and implement ways of improving the company. These improvementsmay result in an increasein productivity or efficiency or satisfaction of employees, and/or improvement of the quality of products and services to producers and/or the public.

A Best Practice company has, at its core, a culture that meets the law at a minimum, rather than just skirting by and meeting the law as a maximum goal. Upon that foundation grows what can be called a “culture of compliance”.

There’s a wide sea of difference between the two land masses of a “culture of compliance” and a “culture of just getting by”. Guess which shore Regulators recommend? And guess which shore they spend more time on because of concerns about market conduct?

One ethics-based Best Practices organization, the Insurance Marketplace Standards Association*, in a recent revision of the Assessment Handbook, says this:

“A critical element in the establishment of an effective market conduct compliance program is management support throughout the organization. Market conduct and compliance leadership that permeates throughout an organization is embodied within the "culture of compliance" concept that has been espoused favorably by regulators and others. A "culture of compliance" can be demonstrated through a variety of different means. However, the following elements may be helpful guideposts to determining whether a "culture of compliance" exists in your company:

-- Tone at the top.

-- Training of company employees and producers.

-- Empower employees to question conduct.

-- Build compliance risk assessments into business decisions.

-- Continually self assess.

-- Regularly update policies and procedures for monitoring and feedback.

-- Dedicate adequate budget for compliance

-- When problems are detected, deal with them quickly and appropriately.

-- Keep senior management and the Board of Directors informed.

-- Keep regulators informed through self-reporting of violations.”

Cost savings are not enough motivation alone to change a company’s commitment to compliance, or Best Practices, but maylegitimately be among the company’s motivations.