We know that conflicts of interest are a feature of most insurance markets. Removing them would risk at best stalling those markets, at worst rendering them inoperable. So the focus should instead be on managing those conflicts of interest. And the first step to managing is making sure that conflicts of interest are recognised and reported.
Yet that isn’t as easy as most might think. If you’re in a conflict of interest, there’s a whole heap of behavioural tendencies that make that ‘recognising and reporting stage’ difficult to perform. Most common are rationalisations such as thinking that ‘no one will be worse off’ or ‘the firm needs this from me’. The risk is that blind eyes are turned to conflicts of interest.
So how can you push employees to be more comfortable with disclosing a conflict of interest? These need to be ways that neutralise the situation, so that the messenger doesn’t get conflated with the message. Don’t let a situation turn into an accusation.
Here are some steps that could be considered.
Get people to see situations from more than just their own perspective. I’ve seen good insurance people just not see conflicts of interest. To them, the client and their interests were secondary to more powerful interests being exerted from within their own firm. Yet in the end, those poor decisions caught up with them and blighted their careers. SMCR and ‘best interest’ provisions make this even more likely now.
Yet putting yourself in someone else’s shoes is not always easy. It requires a shift of mind that can seem counter to the 'driving the firm forward' culture around you. So this points to firms taking active steps to integrate ‘customer voice’ responsibilities across its different functions. It also points to some training in role play and ethical dilemmas. This gives people the experience of seeing something from another person’s perspective.
Equip middle managers with clear guidelines for taking conflict of interest reports and doing something about them. These could involve triggers such as the conflict involving someone in a senior position, in a position with high ethical risks, or where monetary amounts are significant. The key hurdle to overcome here is any tendency to talk down the significance of the conflict and kick it into the grass.
There could be a downside to highlighting some situations to the detriment of others that might not seem so significant at the time. Yet highlighting some is still a step forward, that then needs to be reviewed and developed on a regular basis.
Focus on Risks
There will be areas of the business where the risk of conflicts of interest will be at its greatest. These your firm should have been identified as part of normal business oversight and subjected to increased care and attention. In such areas, this ‘recognising and reporting’ stage should be configured to quickly escalate the issue to someone outside the conflict’s immediate circle. That heightened risk needs heightened attention, from someone better able to weigh it up objectively.
Will these be isolated situations? I doubt it, given that conflicts of interest exist across all functions: underwriting, claims, broking and marketing.
Design Them Out
Firms often find it easier to spot operational conflicts of interest, largely because they are already live and happening. Yet conflicts often come into being on the design board, as new organisational designs, products or services move from sketch to launch. It is quite possible to design some conflicts out of a changing insurance operation. Some ‘insurtech’ firms promote this as part of their core offering, largely for a competitive advantage though, rather than in overall goodwill.
Again, making sure that a strong and clear customer voice is incorporated into your product and service design processes can make a lot of difference.
The identifying and reporting of conflicts of interest will be hugely influenced by the language that surrounds them. So insurance firms who require their employees to avoid conflicts of interest are also sending them a signal that reporting them could be troublesome. And if firms feel that conflicts of interest shouldn’t be happening, then clearly, an employee who finds herself in one will be indirectly encouraged to not see it either.
This is why language around ethical issues matters. Firms should be clear and open about conflicts of interest, acknowledging that they happen, but focusing on resolving them. In turn, employees will be clear and open about the conflicts they come into contact with. That puts the firm and its people on a virtuous circle to handling them better.
A common theme across the above points is that conflicts of interest should not just be seen from the perspective of the insurance firm and its people. They invariably involved clients and it is their perspective that needs to be front of mind when the conflict is being weighed up.