All insurance brokers must have the fair treatment of its customers at the heart of everything they do, and they must be able to show how any action benefits the customer.
All firms must be able to evidence that all their staff are competent for the work that they are employed to do and that all are subject to regular assessments of competency.
As part of the regulator’s operation objectives, all firms must play their part in combating financial crime to protect not just their customer, but the firm its self and the wider community.
What the FCA wants to make sure is that firms have identified, analysed, and mitigated risks to their business, so that they are going to be around in 5 or 10 year or even longer.
So, firms are expected to take the initiative and risk management must be high on the firms agenda and firms must be able to demonstrate that not only are they fully conversant with the risks that they face, but are able to evidence that they have done something to mitigate, where possible, those risks.
It’s about knowing what risks your business faces, doing what you can you stop them happening, making sure you know what is going on at all times and having the right procedures (written down of course) to demonstrate all of this.
There is also a new focus on applicants to perform a Controlled Function, what are known as Approved Persons. Part of that decision making process will be a closer look at the applicant’s personal integrity, financial soundness, honesty and record of treating customers fairly into account when making any decision. The regulator will also expect the applicant’s firm to demonstrate that they have undertaken sufficient due diligence and can demonstrate what benefits this person will bring to the firm and its customers.
Another aspect is that when things go wrong, as they sometimes do, then the firm will be expected to be very proactive in resolving issues.
The FCA is not necessarily saying that they do not want to know when little thing goes awry, but what they do want to see is a firm identifying issues early, analysing what has gone wrong and why, putting together a plan to resolve the issue and having robust procedures in place to ensure that there is no reoccurrence.
They do want to see firms taking this action and having a “grown up” conversation with the regulator, telling them what has gone wrong, why it happened, what has been done about it and why it will not happen again.
This is a far more preferable scenario that the regulator hearing of an issue and coming in to investigate. It is more efficient, less expensive (for all) and does not lead to as much negative publicity or lengthy delays. Remember Principle Eleven, being open and honest with the regulator.
What the regulator wants to see if you taking control and in effect where appropriate carrying out your own Skilled Persons Report. This is a useful tool in the FCA’s workbox and is used where they have concerns about a particular aspect of a firm’s practices and in essence, they instruct an industry expert to go to your firm and carry out an appropriate review. Not only is this very intrusive, but is also very expensive for the firm in terms of time and money. The FCA instructs the firm and you pay the bill.
Far better that you retain control and can present your own findings to the regulator. Of course, you will need to be talking to the regulator at a very early stage when you discover any irregularities.
Ultimately, it is all about a firm’s systems and controls, its culture and how it conducts its business.