Em­bed­ding reg­u­la­tions: A short-term in­sur­ance trend in 2014

Finweek English Edition - - INSIGHT -

When­ever there is a cri­sis or a fi­nan­cial melt­down, like we saw in 2009, the first people to suf­fer are i nsurance pol­i­cy­hold­ers. The pro­tec­tion of pol­i­cy­hold­ers has thus be­come im­por­tant to reg­u­la­tors and a se­ries of reg­u­la­tions has been re­leased to ad­dress their vul­ner­a­bil­ity.

The reg­u­la­tions range from cus­tomer-spe­cific re­forms, such as Treat­ing Cus­tomers Fairly (TCF), Pro­tec­tion of Per­sonal In­for­ma­tion (PPI) to in­dus­try-spe­cific reg­u­la­tions, such as Bin­der Reg­u­la­tions and Sol­vency As­sess­ment Man

age­ment (SAM).

Our main strate­gic fo­cus this year will be to em­bed these reg­u­la­tions in our busi­ness, pri­ori­tis­ing the ma­jor ones such as TCF and Bin­der Reg­u­la­tions. Cor­po­rate cul­ture is vi­tal to en­sure suc­cess in this re­gard. We need to fur­ther en­cour­age a cul­ture in our businesses – es­pe­cially in the fi­nan­cial ser­vices in­dus­try – where em­ploy­ees un­der­stand and em­brace reg­u­la­tory and other types of change.

One of the most im­por­tant reg­u­la­tions in 2014 will be TCF, which en­cour­ages the fair treat­ment of clients. This does not mean that ev­ery claim sub­mit­ted has to be paid out but rather en­sures a com­mit­ment to pay all le­git­i­mate claims promptly and fairly. All pro­cesses also have to be fair and trans­par­ent where the cus­tomer is con­cerned.

Mu­tual & Federal is largely an in­ter­me­di­ated in­sur­ance busi­ness and will thus be af­fected by the im­ple­men­ta­tion of Bin­der Reg­u­la­tions. They reg­u­late the type of out­sourc­ing ac­tiv­i­ties un­der­taken. Reg­u­la­tors are in­cred­i­bly con­cerned about fair party busi­ness. Al­though there are a lot of is­sues to ne­go­ti­ate with the reg­u­la­tor, we’re con­fi­dent that we’re mak­ing progress.

The other pil­lar of the reg­u­la­tory re­forms is the SAM re­form. This re­form was drawn up to en­sure that in­sur­ers have enough cap­i­tal so that, even in a worst-case sce­nario, they should still be in a po­si­tion to pay out and re­main sol­vent.

Mu­tual & Federal is al­ready some way ahead of the in­dus­try when it comes to cap­i­tal ad­e­quacy and this has man­i­fested in the com­pany’s high credit rat­ing. The com­pany was lauded for a “very high claims pay­ing abil­ity” and re­ceived a sta­ble out­look by leading rat­ing agency, Global Credit Rat­ing (GCR), in Novem­ber 2013. It also main­tained its AA+ rat­ing in terms of its na­tional scale claims pay­ing abil­ity.

Mu­tual & Federal is im­ple­ment­ing var­i­ous cam­paigns to em­bed a more fo­cused and dis­ci­plined risk cul­ture in our busi­ness.

An im­por­tant as­pect of our brand prom­ise to our cus­tomers is to pro­tect what is im­por­tant to them. This in­cludes the per­sonal in­for­ma­tion that they pro­vide to us, which we are en­trusted to col­lect and use in a fair, re­spon­si­ble and se­cure man­ner.

To show our com­mit­ment to sup­port reg­u­la­tory changes, we are spon­sor­ing a se­ries of sem­i­nars ti­tled ‘On the Reg­u­la­tory Front’ at 10 venues across the coun­try aimed at ed­u­cat­ing in­ter­me­di­aries in the fi­nan­cial ser­vices in­dus­try. Topics in­clude dis­cus­sions around ways the in­dus­try and bro­kers should nav­i­gate the im­ple­men­ta­tion of reg­u­la­tions such as TCF, FAIS (Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices Act), Bin­der and PPI.

In sum­mary, it’s not just about chang­ing pro­cesses but also about chang­ing at­ti­tudes. One can­not treat this as a com­pli­ance or risk f unc­tion. While some reg­u­la­tions might seem like overkill, pol­i­cy­hold­ers must not be com­pro­mised. This is im­por­tant to grow a sus­tain­able busi­ness; we pro­tect the busi­ness by pro­tect­ing pol­i­cy­hold­ers.

Karen Miller Ex­ec­u­tive: Cor­po­rate & Niche

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