My starting point with most regulation is that if it is to happen, then it should have an impact (other than just the work reporting it). And by ‘have an impact’, I mean a recognisable one. There’s nothing worse than requirements that deliver little more than a bulked up rule book.
So on reading about the FCA’s consultation, my first thoughts were around what impacts this training requirement had been having. Had it raised the overall level of training for insurance employees? Had it had an impact on the competency and knowledge of a workforce? Were broader corporate aspirations around culture and quality being more easily delivered? In short, was it making a difference?
It’s not for me to have answers for such things ; I’m not party to such information. The regulator is though and they should be public about their findings. After all, if the requirement was introduced for a reason that justified the work to bring it into effect, it seems reasonable for its withdrawal to be evidenced around that reason no longer existing.
Training and Growth
The background music around de-regulation at the moment is that it can be hinderance to growth. Less rules means more time growing your business, goes the narrative. In some ways, that makes sense when regulation mounts and mounts, yet with training, the anti-growth argument for its removal is wobbly. After all, big corporate goals around themes like productivity, agility and innovation exist to encourage growth, yet also have training as a key ingredient. Businesses that underinvest in training tend to grow less.
Conduct
Bear in mind that the FCA is called the Financial Conduct Authority for a reason. So we need to think about the impact that training can have on various forms of financial and non-financial misconduct.
Let’s look at this in two ways. One revolves around the compulsory’ness of the training. We did it in order to get it done, goes the narrative. Does making it no longer compulsory improve the all round quality of training? It can do, if what is then done is supported and designed right. As I said earlier, it needs to be thought through from the perspective of the problems and opportunities that the business is facing.
The other way to look at this is as follows. I’ve found a lot of conduct related training in the insurance sector to be pitched too far up the ladder. What I mean by this is that such training tends to tell people where they need to be. It often lacks showing them how to get there. So in the analogy of a ladder, there’s no point telling people to perform at the top of the ladder, if you don’t then show them the rungs.
For example, with a number of intermediaries, I’ve seen them emphasising just how important trust is, yet shy away from exploring the steps necessary for turning those words into practice. To be honest, good intentions count for little if the work that will earn trust isn’t undertaken.
Compulsory Ethics Training?
Am I surreptitiously calling for compulsory ethics training? It certainly exists in various parts of Europe and North America, but never in the UK. The FCA’s predecessor once considered it but got cold feet.
I’m not calling for compulsory ethics training for everyone in insurance. What I am urging upon firms is to make sure that more of the training they do is orientated around the practical steps to tackle misconduct risks. That requires good ethics risk assessment, something I often don’t find particularly thorough when reviewing programmes. Firms tend to do more of what they would like to do, rather than what they should be doing.
Other Obligations
Let’s now look at this question about compulsory training from a quite different direction. What could actually happen if it was withdrawn? Bear in mind that under the SMCR, firms would still have to assess the extent to which individuals possess the necessary level of competence, knowledge and experience. How is the regulator then understanding how well this requirement is being abided by?
After all, compulsory training is a conduct signal. If you’re not delivering enough training, you’re less likely to be fulfilling obligations. So if the regulator is no longer receiving a ‘doing training’ signal, what other signals is it receiving that can be relied on instead? We don’t know, and this therefore casts a shadow over this particular piece of de-regulation.
Inputs and Outcomes
The FCA introduced a significant piece of outcomes based regulation recently, in the form of the Consumer Duty. At the same time, it requires firms to work to a clear list of business principles. My worry is that a lot of ground lies between principles and outcomes. Too much ground perhaps, unless the regulator has very strong data and very applied analytics to track that middle ground. I don’t think the FCA is so equipped nor fully willing to apply what they do have.
What we seem to be seeing is the withdrawal of regulations relating to the inputs that support that middle ground. Is the FCA’s thinking something along the lines of “if the outcomes are right, then who cares about what inputs delivered them”? Such a sentiment can have legs but only to the extent that you can comprehensively and accurately measure outcomes. Again, I don’t think the FCA can do that at this point in time.
To Sum Up
I am in favour of the requirement for 15 hours of ongoing training for general insurance people being withdrawn, but only to the extent that the outcomes it had been introduced to deliver can be evidenced as being delivered. Perhaps I’ve missed evidence of those outcomes, but at the moment, that evidence seems to be either missing or not being disclosed. This leaves room therefore for the FCA to be judged to have withdrawn the requirement for political reasons.
What I would like to see kept though is some requirement around firms that have clearly got misconduct problems. Something along the lines of ‘if problem A arises, then ethics training of scope B becomes compulsory’. You fit and time the solution to the problem, rather than just throw training at everyone in the hope that something will stick.
The FCA needs to have an option to enforce training obligations for cases of shortcomings in conduct leadership or corporate culture.
