risk & governance - finity consulting€¦ · demystifying the legal speak. changes. key themes...
TRANSCRIPT
Risk & Governance Forum 18 June 2019
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.
CHANGES. KEY THEMES 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)
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
CONDUCT. BEHAVIOURS 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)
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.”
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…
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
ENFORCEABLE CODES.
Code provisions to have effect of law
Remedies for policyholders
Sanctions power for Code Governance Committee
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
PROTECTION. CONSUMER
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)
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.”
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
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
QUESTIONS. #riskforum19