Compliance in Insurance: An Industry Within an Industry

Roger Bickmore
Insurance Experts' Forum, July 16, 2013

At times the insurance industry seems to defy gravity, growing profitably even in the direst of economic conditions. Yet, the recent announcements by both Aviva and Direct Line of job losses around 2,000 apiece are a reminder that our workforce is not immune in these recessionary times. As the pricing conditions in the United Kingdom continue to deteriorate, we can expect more companies to pursue cost-cutting strategies to preserve their profit margins.

Despite all this, bucking the trend is the Financial Ombudsmen Service's (FOS) recruitment efforts; increasing its staff numbers by 1,000 in the next 12 months. Funded by the industry, the FOS are the independent experts who sort out individual complaints that consumers and financial businesses are not able to resolve themselves. They are busy people. According to their CEO Natalie Ceeney, speaking to the CII Journal, the FOS are now dealing with 2,000 formal complaints about Payment Protection Insurance (PPI) per day, a 140-percent increase over last year. Even other areas of business are producing 20 percent more unresolved complaints per annum.

By misselling pensions, endowments and PPI, public confidence in the financial services sector to offer sound advice and provide suitable products has been tarnished. As the price to pay to restore customers’ trust, insurers have accepted that they need to embed a culture supported by processes that ensure what they offer meets a genuine need and is marketed fairly. Most agree that getting their house in order is necessary despite the sizeable extra cost. There are signs, however, that attitudes might be changing.

No doubt some extended warranties or mobile phone insurance policies are poor-value, but the consequences for the consumer are less profound than what happens when long-term savings, retirement provision or property financing are messed up. Therefore, the decision announced last week by the Financial Conduct Authority (FCA) to conduct a market study of these sorts of add-on products is raising one or two eyebrows. According to the Insurance Insider, this is the seventh new review announced since April. No surprise perhaps that Aviva’s CEO Robin Spencer, speaking at the recent ABI conference, discouraged the FCA from trying to “solve everything” and called for some “proportionality and priority-setting”.

Once they are done hiring, the FOS will have 4,500 employees and the FCA already has 2,800; sizes of organisation comparable to a leading insurer. Added to this are the legions of people working inside insurance companies and brokers whose job it is to ensure that the regulations are understood and followed. The compliance industry-within-an-industry has evolved and is expanding fast whilst the sector it serves seems to be entering a phase of retrenchment. Unfortunately insurers forced to shrink their investment in service delivery and product development will struggle to cope with the raft of consumer regulation and ultimately let the customer down, leading to more complaints. If this cycle of discontent is to be avoided, then business leaders and policy-makers should agree a common compliance agenda that rightly protects the public but is also deliverable within the economic constraints that insurers and brokers may soon find themselves.

This blog was originally published on Roger Bickmore's website, "The Lookout."

Roger Bickmore is the Group Business Development Director at Kiln Group, insurance underwriters at Lloyd's of London.

Readers are encouraged to respond to Roger using the “Add Your Comments” box below. He also can be reached at

The opinions of bloggers on do not necessarily reflect those of Insurance Networking News.

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

3 Reasons DevOps Matters

Every insurer needs to compete on products and information turned around in light-speed fashion.

Coordinate Coverages to Manage Social Media Exposures

The bottom line is that no one policy will cover all the exposures in the social media realm.

The Internet of Things: Helping Insurers Make Better-Informed Decisions about Risk

The IoT is a major game changer for the insurance industry, and will likely affect every part of the insurance value chain. After all, insurance is data-driven, and that’s exactly what the IoT can deliver—relevant, actionable, real-time data that can provide an accurate picture of what is being—or may be—insured.

Software-Defined Everything

What does it take to virtualize all the key components in your data center?

On Thanking the Regulator … Really

The Financial Conduct Authority is demanding higher standards of consumer protection from insurers, which could lead to greater customer engagement and understanding.

Competing with the Coasts for Tech Talent

Are heartland-based insurers at a recruiting disadvantage for tech skills?