On the 6th of January, the FCA issued a ‘Dear CEO’ letter warning managers in general insurance to be proactive in tackling issues of non-financial misconduct.
This follows the introduction of the Senior Managers and Certification Regime (SM&CR) in December last year. The regime has been described by the regulator as “a catalyst for driving cultural transformation” within financial services and the publication of this letter supports this.
The letter sets out what is expected of firms in implementing SM&CR and taking incidents of non-financial misconduct seriously. Jonathan Davidson, who is Executive Director of Supervision, Retail and Authorisations at the FCA, wrote that, non-financial misconduct and unhealthy culture “was a key root cause of recent major conduct failings within the industry.”
He goes on to say that “although work has been undertaken in the market to tackle the issue of non-financial misconduct, it continues to be prevalent and will be a key focus for our supervision of firms and of senior managers.” This makes it clear that firms need to do more in order to drive positive change.
The letter identified the ‘four key drivers of culture’ that relate to healthy cultures and reduce the potential for consumer harm. These are:
- approach to rewarding and managing people
- governance, systems and controls
Clearly, the FCA is taking incidents of non-financial misconduct seriously and firms should take this letter seriously in their approach to dealing with such issues. SM&CR was a big talking point in 2019, but the real work required in embracing this cultural change very much continues into 2020.
Click here to read the letter in full.
If you require any help regarding SM&CR, please get in touch with your RWA Business Manager or get in contact via the helpdesk - firstname.lastname@example.org.