If you have started thinking about which areas your board might be interested in focusing on in 2021, then please read on. We’ve spent a lot of our time in 2020 reading the minutiae of detail in FCA Business Plans, Consultation Papers, Guidance Notes and Policy Statements to understand the key areas that we believe you or your board should be focussed on next year. As with so much in life an investment up front is likely to give you more time in the future to focus on other matters that are important to your business.
As an organisation, ICSR has been seeking counsel from across its team of staff and Talent Pool members, some of whom also hold NED roles and themselves have clear views on the key issues board members need to understand to ensure they can provide appropriate guidance and oversight to the businesses they are responsible for, meeting their legal and regulatory responsibilities effectively.
Working with firms across the market – both solo and dual regulated firms – has enabled us to build a deep understanding of the way these issues need to be addressed from the regulators’ perspectives, from the Board down to those responsible for operational implementation, understanding the regulatory requirements and issues, through delivery, to review and refinement of processes.
These are the key topics we are advising Boards and Board members to focus on as 2021 approaches:
Governance in a regulated world
Your board provides the strategic direction and oversight for your business. Governance needs to continually evolve to reflect changing priorities and we have certainly seen significant change in 2020. Allow ICSR to help your board review their effectiveness and governance to ensure the board continues to meet the changing needs of a regulated insurance firm operating in the post-Brexit UK market.
An emerging consultation being run jointly by the FCA, PRA and Bank of England, it touches on virtually every aspect of the way an organisation delivers its products and services to consumers. Our team have been discussing the issues in a series of webinars (link to YouTube playlist) over the last few months, as well as working with a number of clients on their projects. With the regulators watching closely to see how firms have responded to the coronavirus pandemic, we are expecting this to be a major strategic objective for firms in 2021. It is an issue that must be sponsored at Board level if it is to be effectively addressed.
One of 5 pieces of ‘cross-cutting work’ identified by the FCA in their Business Plan released in April 2020. In their own words “The financial sector needs to adapt to manage the physical and transition risks that climate change poses.”
The FCA also confirmed it will continue to host the Climate Financial Risk Forum (CFRF), which they set up with the Prudential Regulation Authority (PRA) in 2019 and we anticipate that firms not currently considering the issue and risks at Board level will begin to see increased scrutiny and questioning from their regulator on the implications for their business. It is an area that needs careful consideration over a broad range of disciplines within the organisation.
Product Governance in the Post-Covid World
The product governance process is set out in the Product Intervention and Product Governance Sourcebook (PROD) and has been the subject of discussion in a number of different areas in 2020 including the General Insurance Pricing review and the Vulnerable Customers review. With Covid-19 also changing the playbook when it comes to considering the implications of scenarios on insurance products, product governance is becoming a function that requires increasing Board oversight to ensure product governance is operating effectively. How has your board adapted its approach and guided your firm to change the way it approaches product governance?
Pricing in General Insurance
The FCA have recently issued a new report on General Insurance Pricing and despite the headlines that focus on motor and household insurance, this is an issue that affects insurers underwriting all types of general and pure protection insurance, with a number of fairly tight deadlines potentially looming in 2021 if the proposed handbook changes are implemented as proposed. A clear strategic direction from the board is an imperative if you are to ensure compliance with these changes.
The FCA have estimated over 24 million consumers show at least one characteristic of vulnerability, a number they expect will rise as a consequence of the global coronavirus pandemic. The FCA are looking for a complete change in mindset from businesses in the way they identify and treat vulnerable customers. That change needs to be driven by the board and will have major implications for your Product Governance process.
Culture appeared again in the FCA Business Plan in April 2020 but the way they are approaching the issue does not follow the typical course of consultation paper, feedback process, policy statement, proposed changes to the handbook and implementation. It is perhaps better described as a theme that the FCA are looking to see underpin the way insurance firms behave, driven by clear strategic guidance from the Board. The word ‘culture’ now seems to appear in virtually every document issued by the FCA and ‘setting the right culture’ is a clear expectation the FCA has from board members. What is ‘right’ is more an issue for boards to define, based on all of the other strategic objectives and regulatory requirements. ICSRs work with clients on culture places us in a position of being able to talk to boards about the issue with knowledge and experience.
ICSR has a somewhat unique perspective on these issues through the combined knowledge and expertise of our directors, team and talent pool members. Senior individuals who have themselves worked on these issues for a variety of firms across the market and built detailed knowledge of the approaches required to address such issues.
Talk to us about the best way to utilise our range of resources to help you and your Board understand the issues and evolve your own strategy to address them. We can offer support through a range of mechanisms including training, facilitation of discussions on specific subjects, advisory reports and resources to assist with the implementation of your strategies.
ICSR is supporting the Insurance Community initiative 'Computers4Schools'. Find out more about the way you and your organisation can support this by watching this video narrated by Huw Evans, Director General of the ABI.