Regulatory & Compliance Issues in the Insurance Sector – Impact on culture & hiring

May 12, 2018

Taylor Root were delighted to host a breakfast roundtable in London to discuss the compliance and regulatory issues affecting the insurance sector and how these impact company culture, senior management responsibility and hiring. The event was co-chaired with two partners at Pinsent Masons who specialise, respectively, in a wide range of both contentious and non-contentious regulatory issues in the insurance sector. The audience consisted of Senior Compliance Heads from the leading insurance businesses.

I opened the discussion by commenting (and received nods of agreement) that it is an extremely busy time within the insurance sector with IDD; Wholesale Market Review; SM&CR and GDPR all on their radar. However, with Compliance professionals focused on this, is there a risk of any other big themes being missed? During the roundtable the following topics were discussed:


Regulatory Deadlines

Of course, deadlines must be adhered to but what about when they are pushed back (IDD was delayed to 1 October 2018 from 23 February 2018 for example)? Whilst this is usually welcomed by the market, what impact does this have on the individual compliance officer? How does it affect their motivation and training & competency plans? There was agreement that these deadlines can cause performance management issues and how best to keep momentum going when communicating with business people (the out of sight, out of mind mentality).

The three lines of defence model can help as it places the “ownership problem” with the business. (As a side note, there was a consensus among the audience that this was the best model in terms of structuring the risk and compliance team).

How then does the 2nd line differentiate itself from the 3rd line audit team, where there could be a danger of duplicating work? It was discussed that 2nd line monitoring teams still need an advisory element to the team as there is a definite requirement to not just “check” the business but also educate them on “what good looks like”. However, the panel agreed that hiring good monitoring officers is extremely difficult in the current market.

From a recruitment perspective, 2nd line monitoring roles do appear to have an image problem.

It is much more difficult to recruit into the monitoring team because of a lack of understanding of what the role should involve – both with hiring managers and potential candidates. There was surprise around the table that compliance monitoring was “boring” when in fact it has the potential to offer candidates a more rounded view of the business and the commercial acumen that is essential for future compliance leaders.

IDD timeframe and its impact

The IDD deadline being deferred for six months is well documented and whilst I mentioned the issues against this above, there are some positives. The extended timeframe has been useful. The additional six months has given the business time to have structures in place, ensuring there will be less ‘over hang’.

The consensus was that the extended timeframe is more achievable for businesses and will allow for them to ensure the correct systems & controls are in place.

The difficulty lies within product oversight across the usually long and complex distribution chain. How to make it simpler for the FCA to structure their audits and reviews was discussed and Regtech/Fintech was offered as a potential solution.

Compliance Team Structure

From speaking with various Senior Compliance professionals, it’s interesting to see how businesses structure their compliance functions to suit their induvial business needs. Larger firms tend to have dedicated advisory and monitoring teams, but the wrong reporting lines can also limit a compliance team’s effectiveness and have a detrimental effect on culture.

The litmus test good compliance officers should use to determine whether a firm has a good compliance culture, is whether the reporting line is ultimately into a Chief Financial Officer or Chief Executive Officer.

If it’s the former, then there is concern that monetary rather than value judgement will be applied to regulatory challenges.


Future of Compliance in the Insurance Sector

It will come as no surprise that how to harness data dominated the conversation. The volume of data available to businesses now-a-days is astounding. Firms can acquire personal data from legitimate sources enabling them to tailor their products to their customers. With equality and privacy law front and centre in the public mindset, compliance will have a huge role to play in ensuring correct product governance. Fintech/Regtech will play a huge role in the insurance sector over the next decade.

In an industry where sanctions screening is usually the only automated process in compliance, insurers still have a long way to go when it comes to embracing technology.

IT, systems development, programming will be the next big skills gap in compliance. It is widely known amongst recruiters and hiring managers that finding candidates who can balance compliance with commercial acumen is the key to any good hire in today’s market.

However, because technology is playing an ever-increasing role within the industry, IT knowledge will become a prominent part of any job description over the next 10 years.

Even now we are seeing many IT auditors and IT Developers moving into more compliance orientated roles/functions due to their superior systems knowledge. It is easier to do this rather than train compliance officers in technology!

There are interesting times ahead for compliance within the insurance sector and I’m intrigued to see how the FCA’s relationship will change as well as how IT will affect things. To discuss any of the above topics in further detail or if you would like information about recruitment within the compliance sector, feel free to contact me at or 02074152833.