In the insurance industry, Corrective Action Plans (CAPs) are typically required following internal audits, market conduct examinations, regulatory reviews, compliance monitoring activities, insurer oversight reviews, delegated authority audits, or other assessments that identify deficiencies or a deviation from established standards requiring remediation. They are produced when a finding is identified but before the review file is officially closed out. There are various templates and models for creating and structuring a CAP, and these vary by industry.
CAPs are not unique to the insurance industry and are used in many fields. Many regulators and states have an established cycle for reviews that can result in a CAP; however, they can also be random to ensure compliance.
Prior to insurance, I worked for 2 decades in heavily regulated child welfare systems where CAPs were reviewed against strict regulatory standards. That experience shaped how I evaluate CAPs today and informs the observations that follow.
Due to the lack of a standard framework or template structure within the insurance industry, organizations create their own, which produces variation in quality and defensibility. Three things stand out as the most common reasons that insurance CAPs tend to miss the mark when an examiner gets to them.
The absence of a root cause
The absence of owner accountability
The absence of voluntary disclosure consideration (not always a popular take)
By submitting a defensible response and remediation plan, there is less likelihood of additional punitive action or fines, and it can also reduce follow-up exposure with the regulator or reviewer.
The Absence of a Root Cause
The CAP describes what happened and skips the why. The violation is recited, and the remediation is listed. What is missing is the explanation of the operational condition that produced the result. A finding that claim acknowledgment letters went out late, or not at all, is the symptom that triggered the finding in the audit; it is not the root cause issue.
The root cause is whatever in the workflow, system configuration, supervisory review, or intake structure actually produced the delay or omission. A CAP needs to demonstrate that the organization understands the problem it claims to be fixing. A useful root cause statement is concise, has its own section of the CAP, and answers one question: What aspect of the system produced the finding or result being corrected? If that section is missing, the remediation is unsupported.
As an example, in a 2025 file review and CAP that I worked on, a workflow change was the remediation, but the root cause was never written down. When I asked multiple internal stakeholders what had actually gone wrong, the true answer was below the workflow itself and layered into the technical claims system with nothing to do with the personnel implementing it.
The Absence of Owner Accountability
Most CAPs assign the fix to a department and a quarter timeline. For example, consider the following statement: "Claims Operations will implement a revised workflow by Q3." This is too broad to hold any real accountability. There needs to be a position with a title in it because positions survive regardless of who is operating in them, which also prevents the document from requiring continual updates as people change roles.
A quarter is the kind of milestone an internal status report uses.
A date is what can be committed to and either met or missed.
The fix is structural and easy to do.
The owner field should name an actual position rather than a department.
The completion date should be an actual calendar date.
The effectiveness review date is a separate date, far enough out so that the change has had time to be implemented and close enough that implementation hasn't strayed.
The documentation field names what artifact will demonstrate that the work was done.
Insurance compliance has historically tolerated a softer version of this section than the human services world ever did. In my prior environment, a CAP that named a department in the owner field was returned for revision before substantive review even began. When accountability gets diffused across a department, real harm can occur. Having learned the hard way, requiring a specific position and a specific date is the only reliable way to make a CAP actually close the loop.
The Absence of Voluntary Disclosure Consideration
When a violation or pattern is identified, the question of whether to proactively disclose to the affected regulator, insurer, reinsurer, or delegated authority principal belongs in the plan. This is often debated within legal and compliance departments with valid points from both sides. In my view, proactive self-disclosure and self-reporting tend to increase organizational credibility and trust.
That does not mean every CAP should recommend disclosure—the assessment may conclude that no disclosure is required, and in many cases, that conclusion will be defensible. What is important is documenting the assessment in the CAP itself. The jurisdiction's self-reporting expectations and any contractual disclosure obligations to the insurer or principal belong inside that analysis.
What a Defensible Plan Looks Like
Defensibility should be in mind as a strong layer of protection when building quality and compliance departments. A strong, defensible CAP includes the following.
A clearly articulated issue statement that includes any finding, laid out in operational terms to show that the problem is understood beyond any regulatory failure.
A quantifiable impact and scope analysis that demonstrates how wide and deep the issue goes to show that the remediation is proportionate to the problem (how many affected files, policies or items, time period, jurisdictions affected, any consumer impact, etc.).
The root cause analysis needs to articulate an immediate correction, any systemic correction, and a gap analysis of internal controls.
Ownership at the position level with timeline milestones, verification and effectiveness methodology, and a sustainability mechanism clearly defined.
The voluntary disclosure assessment or notification to address any triggers for obligatory or elective notification to a regulator, insurer, reinsurer, or delegated authority principal and the reasoning behind the conclusion with a documentation plan, escalation protocol, and closure standard.
Even when the conclusion is no disclosure, the documented analysis matters. Often, compliance professionals neglect the compliance philosophy, which matters just as much as compliance implementation.
Federally regulated industries have laid out some guidelines or semblance of CAP frameworks. However, there is a gap within the insurance industry because of an absence of a CAP framework with named core components published by the National Association of Insurance Commissioners (NAIC).
The corporate compliance frameworks driven by the Department of Labor, Centers for Medicare and Medicaid Services, and Department of Justice all land on a set of core CAP components (such as root cause, ownership, timeline, verification, etc.), while the NAIC's Market Regulation Handbook addresses CAPs primarily through timing requirements adopted into state law rather than through an outlined structural standard. The only NAIC requirement, adopted into state law through the Market Conduct Surveillance Model Law, is that the insurer's response includes an implementation date and a completion date or, alternatively, a rebuttal.
Essentially, CAP structure has been delegated to the discretion of the regulated entity, resulting in a wide variety of quality and defensibility among generated CAPs. In addition, how a CAP holds up across examination and review cycles can vary as well.
With that in mind, if I had to give a junior compliance analyst one piece of advice regarding developing a CAP, it would be this: Think about remediation, and produce a document that addresses and speaks to what is missing. Ensure that it reflects the gap within the gap. Identifying and remediating the root cause is what prevents the finding from recurring. This is the standard I learned in regulatory environments where the cost of failure was not only measured in fines, but the risk was real human harm, and it is the standard I write to now.
Comparative federal frameworks referenced include the US Department of Labor, Bureau of International Labor Affairs, Sourcing Strong: A Social Compliance Toolkit for Brands, Step 6 (Remediate Violations).
Centers for Medicare and Medicaid Services Plan of Correction framework under 42 CFR Part 483, Subpart B.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
In the insurance industry, Corrective Action Plans (CAPs) are typically required following internal audits, market conduct examinations, regulatory reviews, compliance monitoring activities, insurer oversight reviews, delegated authority audits, or other assessments that identify deficiencies or a deviation from established standards requiring remediation. They are produced when a finding is identified but before the review file is officially closed out. There are various templates and models for creating and structuring a CAP, and these vary by industry.
CAPs are not unique to the insurance industry and are used in many fields. Many regulators and states have an established cycle for reviews that can result in a CAP; however, they can also be random to ensure compliance.
Prior to insurance, I worked for 2 decades in heavily regulated child welfare systems where CAPs were reviewed against strict regulatory standards. That experience shaped how I evaluate CAPs today and informs the observations that follow.
Due to the lack of a standard framework or template structure within the insurance industry, organizations create their own, which produces variation in quality and defensibility. Three things stand out as the most common reasons that insurance CAPs tend to miss the mark when an examiner gets to them.
By submitting a defensible response and remediation plan, there is less likelihood of additional punitive action or fines, and it can also reduce follow-up exposure with the regulator or reviewer.
The Absence of a Root Cause
The CAP describes what happened and skips the why. The violation is recited, and the remediation is listed. What is missing is the explanation of the operational condition that produced the result. A finding that claim acknowledgment letters went out late, or not at all, is the symptom that triggered the finding in the audit; it is not the root cause issue.
The root cause is whatever in the workflow, system configuration, supervisory review, or intake structure actually produced the delay or omission. A CAP needs to demonstrate that the organization understands the problem it claims to be fixing. A useful root cause statement is concise, has its own section of the CAP, and answers one question: What aspect of the system produced the finding or result being corrected? If that section is missing, the remediation is unsupported.
As an example, in a 2025 file review and CAP that I worked on, a workflow change was the remediation, but the root cause was never written down. When I asked multiple internal stakeholders what had actually gone wrong, the true answer was below the workflow itself and layered into the technical claims system with nothing to do with the personnel implementing it.
The Absence of Owner Accountability
Most CAPs assign the fix to a department and a quarter timeline. For example, consider the following statement: "Claims Operations will implement a revised workflow by Q3." This is too broad to hold any real accountability. There needs to be a position with a title in it because positions survive regardless of who is operating in them, which also prevents the document from requiring continual updates as people change roles.
Insurance compliance has historically tolerated a softer version of this section than the human services world ever did. In my prior environment, a CAP that named a department in the owner field was returned for revision before substantive review even began. When accountability gets diffused across a department, real harm can occur. Having learned the hard way, requiring a specific position and a specific date is the only reliable way to make a CAP actually close the loop.
The Absence of Voluntary Disclosure Consideration
When a violation or pattern is identified, the question of whether to proactively disclose to the affected regulator, insurer, reinsurer, or delegated authority principal belongs in the plan. This is often debated within legal and compliance departments with valid points from both sides. In my view, proactive self-disclosure and self-reporting tend to increase organizational credibility and trust.
That does not mean every CAP should recommend disclosure—the assessment may conclude that no disclosure is required, and in many cases, that conclusion will be defensible. What is important is documenting the assessment in the CAP itself. The jurisdiction's self-reporting expectations and any contractual disclosure obligations to the insurer or principal belong inside that analysis.
What a Defensible Plan Looks Like
Defensibility should be in mind as a strong layer of protection when building quality and compliance departments. A strong, defensible CAP includes the following.
Federally regulated industries have laid out some guidelines or semblance of CAP frameworks. However, there is a gap within the insurance industry because of an absence of a CAP framework with named core components published by the National Association of Insurance Commissioners (NAIC).
The corporate compliance frameworks driven by the Department of Labor, Centers for Medicare and Medicaid Services, and Department of Justice all land on a set of core CAP components (such as root cause, ownership, timeline, verification, etc.), while the NAIC's Market Regulation Handbook addresses CAPs primarily through timing requirements adopted into state law rather than through an outlined structural standard. The only NAIC requirement, adopted into state law through the Market Conduct Surveillance Model Law, is that the insurer's response includes an implementation date and a completion date or, alternatively, a rebuttal.
Essentially, CAP structure has been delegated to the discretion of the regulated entity, resulting in a wide variety of quality and defensibility among generated CAPs. In addition, how a CAP holds up across examination and review cycles can vary as well.
With that in mind, if I had to give a junior compliance analyst one piece of advice regarding developing a CAP, it would be this: Think about remediation, and produce a document that addresses and speaks to what is missing. Ensure that it reflects the gap within the gap. Identifying and remediating the root cause is what prevents the finding from recurring. This is the standard I learned in regulatory environments where the cost of failure was not only measured in fines, but the risk was real human harm, and it is the standard I write to now.
References
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.