Earlier this week the Financial Markets Authority (FMA) and the Reserve Bank of New Zealand (RBNZ) released a conduct and culture paper on life insurers which calls for improvement in conduct risk oversight.
An official statement for the RBNZ indicated that it did not find ‘widespread’ misconduct, but there were several instances of misconduct.
According to the report:
Overall, our view is that life insurers have been too complacent when it comes to considering conduct risk, too slow to make changes following previous FMA reviews, and not focused enough on developing a culture that balances the interests of shareholders with those of customers.
This report follows a report that was done on the sector in 2016.
This year’s report found that overall that the risk management around the risk process was immature. Per the paper:
Many insurers appeared to equate good conduct with good compliance, rather than recognising it as an integral part of their business and factoring it into their strategy and product design, sales and after-sales customer communications.
The paper called into the question the responsibility of conduct risk resting with the risk, compliance and audit committees:
While these functions and committees can play an important and independent supervisory role, they cannot have sole responsibility. To achieve good customer outcomes, responsibility for conduct risk management needs to be integrated across all parts of the insurer’s business.
For those that have been following the Hayne Royal Commission into misconduct in banking, superannuation and the financial services sector in Australia, there are some very clear similarities from what was uncovered in the Hayne commission.
Earlier this week, the Treasurer Josh Frydenberg announced that the long-awaited final report from the Royal Commission will be released on the 4 February. Both regulators and the financial industry will wait to see what the recommendation there will be and what kind of changes that they are going to be forced to make.
Meanwhile, The FMA and the RBNZ have called for improvements life insurance industry.
“Overall the report shows the life insurance sector in a poor light. Life insurers have been complacent about considering conduct risk, too slow to make changes following previous FMA reviews and not sufficiently focused on developing a culture that balances the interests of shareholders with those of customers,” FMA Chief Rob Everett said in an official statement.