The Financial Conduct Authority (FCA) has witnessed a “concerning increase” in reports of non-financial misconduct, which can include harassment and discrimination, in the wholesale insurance market over the past year, the regulator said this week in a letter to wholesale market insurance CEOs.
Meanwhile, the regulator said it has taken a dim view of some firms having argued that culture will “take a generation to fix” as an excuse for not acting.
“All insurance firms should reflect on their culture,” FCA director of insurance supervision, policy & competition – consumers & competition Matt Brewis said in the letter to City bosses. “However, the wholesale insurance market in particular has a long way to go in having an inclusive culture with the appropriate channels for staff to feel psychologically safe to speak up and raise concerns.
“This is especially important where tolerance of such behaviours can create or indicate unsafe or unhealthy cultures.”
The regulator flagged diversity, equity and inclusion (DEI) as an area for improvement at all levels, and said that firms should also zone in on the prevention of harassment, bullying, victimisation and discrimination.
“We are ready to use our full range of regulatory tools, including enforcement action, against firms and individuals where we see instances of non-financial misconduct,” Brewis told CEOs. “Firms must report instances of serious non-financial misconduct to us promptly and ensure appropriate systems and controls are in place to deal with such misconduct.”
In a 2020 letter, the regulator set out that non-financial misconduct and unhealthy culture were a “key root cause of harm”.
The latest FCA letter to wholesale insurance CEOs, which outlined numerous priorities outside of DEI issues, came a day after a University of Nottingham study found that alcohol fuelled culture at work and client events could be driving bad behaviour in the insurance industry.
Further priorities outlined by the FCA in the letter to wholesale bosses included a rethink around the clarity of policy wordings in the cyber insurance market.
Operational resilience was also flagged as a priority for wholesale insurance firms, particularly in light of sensitive data held by the London market.
London’s competitiveness as an insurance hub was also in focus, as was embedding consumer duty.
The regulator further flagged potential liquidity issues resulting from rampant mergers and acquisitions (M&A) in the segment.
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