The next two years could be eventful ones for the counter fraud functions in the UK insurance market. If you look carefully at the reputational landscape for this key insurance function, you see a range of developments taking shape. What’s missing is a spark that draws them together and focusses attention on counter fraud like never before. Think pricing walking but bigger, more heightened, more political.
Over the last three months, I’ve been tracking developments in relation to counter fraud on a range of fronts – for example, political, regulatory, media, technology and consumer attitudes. Any one of them doesn’t seem to be enough to warrant treating counter fraud as a reputationally exposed function. That assessment changes when you pull back and look at them together. Then it does look exposed.
These developments are linking together. For example, the political is linked to the regulatory, which is linked to the technology. Media is linked with technology and draws on consumer attitudes. The patchwork of developments are weaving themselves together.
Once they come together, the situation is likely to develop quickly. I don’t think we’ll see another super-complaint, but we will see a combination of political and media attention focussing attention on what regulators are doing about it.
Just as happened with the super-complaint, the regulator will then hastily assemble the small steps that it’s been taking to-date and elevate their attention. Think super-charged rather than super-complaint.
The theme I believe they will follow will be clear and focussed. Yet it will also address concerns with regard to leadership, governance, systems, culture and management. It could shake up counter fraud like no other insurance function has been shaken up before.
Everyone will need Evidence
I suspect that not many insurers will have the evidence to show the regulator they’re not part of the problem. So what do they need to do now, quickly? It is to show that they recognise the issue and are starting to assess their exposure and performance. That involves scoping the issues, identifying their hot spots and assigning responsibility to tackle it. This then needs to form part of planning and priority setting for 2022.
The challenge for those insurers who are, from what I hear, most exposed to the regulatory action I’m anticipating, is that their three lines of defence have not been working. And this then points to problems with the firm’s ethical culture. For those whose are named on the responsibility map, this should be deeply worrying.
It's been put to me that a misconduct review by the regulator into counter fraud won’t happen because the FCA doesn’t want insurers to stop catching criminals. Sure, that may have been the case five to ten years ago, but it’s very far from the case now. Counter fraud has changed a lot in that time and as a result, the ‘…catching criminals’ defence is long past its use by date.
If you’d like me to send you my research notes setting out that evidence, and how insurers should respond, drop me an email.