The Chartered Insurance Institute (CII) is stepping up its role in tackling non-financial misconduct across financial services, warning that rules and guidance alone will not shift the cultural dynamics that allow harmful behaviour to persist.
In a new report, the professional body convened regulatory representatives, compliance experts, employment lawyers, behavioural scientists, campaigners and sector leaders to examine why non-financial misconduct continues to occur and what can practically be done to address it. The roundtable, the first in the CII's thought leadership campaign on the subject, reached a clear consensus - intervention is necessary, but it must go beyond the rulebook.
The report identifies greater public reporting on complaints, processes and outcomes as a potential lever to strengthen accountability and accelerate cultural change. It also highlights commercial pressures, where fear of reputational damage discourages firms from taking action, and the need for firms to build internal capability to exercise consistent judgement on misconduct cases. According to the report, smaller firms are likely to require targeted support to address the particular structural challenges of operating at limited scale.
The data make uncomfortable reading for the insurance industry specifically.
An FCA survey of 1,028 wholesale firms found that reported non-financial misconduct incidents rose by 72% across all respondents between 2021 and 2023, with wholesale insurers recording a 134% increase and wholesale brokers a 139% rise. Wholesale insurers recorded the highest proportion of bullying and harassment cases at 29% of all incidents, with bullying and harassment, discrimination and sexual harassment the most commonly reported types across the sector. Disciplinary action was taken in only 43% of cases overall.
The regulatory backdrop has hardened considerably in response. The FCA's updated COCON rules will apply to both banking and non-banking firms from Sept. 1, 2026, with serious bullying, harassment and violence constituting conduct rule breaches. The changes bring non-bank senior managers and certification regime firms, including insurers, into much closer alignment with banks, for which such standards already apply.
Before September 2026, firms should review whether they need to update their staff policies, conduct breach reporting procedures, fit and proper assessments and regulatory references. The FCA has signalled that its policy work on non-financial misconduct is now largely complete and that its focus has shifted to how firms are tackling misconduct in practice, placing the burden of cultural change squarely on the industry.
Non-financial misconduct claims are increasingly relevant to employment practices liability lines, which are commonly packaged alongside directors' and officers' cover. Legal experts have warned that the removal of the unfair dismissal compensation cap under the Employment Rights Act 2025, due to take effect in January 2027, may also carry implications for reinsurers, as the removal of the cap could cause excess limits under reinsurance treaties to be breached in circumstances that underwriters may not have anticipated.
Lloyd's of London, where cultural reform has been a live and at times painful issue, is pursuing its own parallel framework. A proposed new conduct framework consulted on in late 2024 sought to provide greater clarity on unacceptable behaviour including non-financial misconduct, with a new comemains outstanding.mittee proposed to review and triage reports and senior leaders made jointly accountable for decision-making. The outcome of that consultation, for which feedback closed in December 2024, was a more modernised and strictly aligned framework that establishes direct consequences for non-financial misconduct, such as bullying, harassment, and severe unprofessional behaviour.
Matthew Hill, CII chief executive, said the consequences of unchecked misconduct extend well beyond individual harm.
"Behaviours such as bullying, harassment and discrimination damage careers, confidence and wellbeing, sometimes irreparably. When this behaviour goes unchecked, it also weakens organisational culture, damages firms' reputations and undermines trust in the market," he said. "The CII is committed to working with the regulator and stakeholders across the profession to turn non-financial misconduct policy into impactful practice, and promote professional, healthy working environments."
The report precedes PIMFA's publication of non-financial misconduct guidance on June 23, developed in collaboration with the CII and the Chartered Institute for Securities and Investment (CISI).
The next phase of the CII's research will move from diagnosis to intervention, with priorities that include piloting initiatives within firms, developing baseline measurement frameworks, creating anonymised case study resources and providing psychological safety support for those who come forward.
