risk & governance - finity consulting€¦ · demystifying the legal speak. changes. key themes...

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Risk & Governance Forum 18 June 2019

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Page 1: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

Risk & Governance Forum 18 June 2019

Page 2: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

T H E F O L D L E G A L . C O M . A U

Charmian Holmes June 2019

HAYNE ROYAL COMMISSION: DEMYSTIFYING THE LEGAL SPEAK.

Page 3: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

CHANGES. KEY THEMES AND

Page 4: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

KEY THEMES. APRA will have an increased focus on non-financial conduct risk and regulatory supervision will drive changes to: Culture Governance Remuneration

APRA Information Paper – Self-assessments of governance, accountability and culture (22 May 2019)

Page 5: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

THE NEW LANDSCAPE.

More active regulator Fee for

advice

Motivated and more

professional employees

More litigation and customer

complaints

Increased compliance,

governance and risk

management

Dis-intermediation in some areas

Customer-centric

products, pricing and

delivery

More costs

Better use of technology and

data Cultural change

Reduced agent commissions and

no pressure selling

Page 6: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

CONDUCT. BEHAVIOURS AND

Page 7: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

RECOMMENDATIONS.

Significant improvement to culture, conduct and governance (Recommendation 5.6)

APRA to supervise culture, governance and remuneration (Recommendations 5.1- 5.3, 5.7)

Removal of claims handling exemption (Recommendation 4.8)

Legally enforceable Code provisions and sanctions powers (Recommendations 4.9 and 4.10)

BEAR regime to apply to general insurers (Recommendation 4.12)

Page 8: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

CULTURE & GOVERNANCE.

Assess culture and its governance

Identify any problems and deal with them

Determine whether changes made have been effective

“The process of changing culture

demands intellectual drive, honesty and

rigour.”

Page 9: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

CULTURE & GOVERNANCE. APRA to revise prudential standards including a

supervisory program focused on building culture and mitigating misconduct risk

Take: A risk-based approach to reviews;

Assess cultural drivers of misconduct; and

Promote sound management of conduct risk and entity governance.

Self assessments are just the start…

Page 10: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

REMUNERATION. Realignment with consumer objectives Move to greater executive accountability A balanced scorecard approach Compliance, customer-focused and culture metrics Clawbacks and consequent management Assessing the effectiveness of remuneration structures

against outcomes

Page 11: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

ENFORCEABLE CODES.

Code provisions to have effect of law

Remedies for policyholders

Sanctions power for Code Governance Committee

Page 12: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

CLAIMS HANDLING. Robust systems to

avoid conflicts of interest

Adequate training and monitoring systems

Fairer review process for declined claims

Better engagement between internal and dispute resolution

Page 13: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

PROTECTION. CONSUMER

Page 14: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

RECOMMENDATIONS.

Change to the duty of disclosure (Recommendation 4.5)

Extension of unfair contract terms protections to general insurance (UCT) (Recommendation 4.7)

Ban on hawking general insurance products (Recommendation 4.1)

Treasury-led review on a deferred sales model for add on insurance and capped commissions for motor dealers selling insurance (Recommendations 4.3 and 4.4)

Page 15: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

DUTY OF DISCLOSURE. ‘Duty to exercise

reasonable care not to misrepresent’

More underwriting questions or take the risk!

Less customer complaints / more claims decisions overturned?

“Insurers are always better placed than a policyholder to

identify the categories of information they consider

relevant to their underwriting decision.”

Page 16: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

UNFAIR CONTRACTS.

+ Review of policy wordings – more generous cover

+ Emphasis on strong policy drafting

+ Technical pricing to come under pressure

+ Use of underwriting data and leveraging technology

Page 17: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

SALES MODELS. Add on insurance

Deferred sales model review for add on insurance

Cap on motor dealer commissions to be set by ASIC

Ban on hawking

Minimal impact – some implications for cross selling/referrals

Design and distribution obligation

Page 18: Risk & Governance - Finity Consulting€¦ · DEMYSTIFYING THE LEGAL SPEAK. CHANGES. KEY THEMES AND . KEY THEMES. APRA will have an increased focus on non-financial conduct risk and

QUESTIONS. #riskforum19