März 12. 2024

The insurance sector responds to the FCA's non-financial misconduct survey


Last week, firms in the insurance sector submitted their responses to the recent survey issued by the Financial Conduct Authority ('FCA') into non-financial misconduct.

The survey, issued last month to firms operating in the Lloyd's market, required disclosure of data about incidents of non-financial misconduct over the last three years, including:

  • the number of incidents and how they were detected/recorded;
  • the type of incident (e.g. bullying, discrimination, sexual harassment);
  • the outcome (e.g. dismissal, written warning, complaint not upheld); and
  • whether there were any 'further outcomes' (e.g. whether a non-disclosure agreement ('NDA') was entered into).
The insurance sector as a starting point

The FCA has been under scrutiny recently as part of the 'Sexism in the City' Inquiry being conducted by the Treasury Committee. The Committee has not held back in its questioning of various industry bodies and regulators, criticising the pace of change as too slow.

Yvonne Braun, Director at the Association of British Insurers, conceded in her appearance at the Inquiry that, with regard to sexual harassment in the insurance sector, "there is…still an awful lot of utter nonsense that happens…it is completely unacceptable and shocking". MPs did, however, concede that it was not the worst performing area of finance, with 35% of leadership roles in insurance now being held by women.

The FCA survey follows their January 2020 'Dear CEO' letter and an industry-wide letter sent in September 2023.  Both focused on the wholesale insurance market and urged firms to include non-financial misconduct and diversity, equity and inclusion issues as key elements of their strategic focus.

But the insurance sector is likely to be just the start.  At a recent event, Jamie Bell, Head of Secondary Market Oversight at the FCA, said that the FCA intends to send the survey to 1,000 firms across a range of financial services.

Spotlight on NDAs

The FCA's interest in firms' use of NDAs is interesting, though not surprising.  They are viewed with suspicion – it often being assumed that their use discourages individuals from speaking up about wrongdoing and prevents firms from reporting in full to their regulators. Sarah Pritchard, Executive Director of Supervision at the FCA, has said that NDAs must not preclude whistle-blowers from making reports, or serve as an obstacle to obtaining a full and accurate picture of non-financial misconduct.  Thus the FCA survey looks to track how many incidents ended up with an NDA being entered into.

What next?

The FCA survey comes soon after its proposals, issued under a consultation paper at the end of last year, to introduce new requirements for firms to report on diversity and inclusion metrics, and new rules as to what constitutes non-financial misconduct. The final rules are due to be published later this year and it remains to be seen whether the survey results will influence the final direction taken. At the time of the consultation paper's publication in December, there was no mention of the survey that was subsequently issued. 

Until the new rules are published, regulated firms who have yet to receive the survey would do well to review their reporting and record-keeping processes. They should make sure they will be able to gather the data required sufficiently quickly (the insurance sector survey required responses within a month), if and when a survey request arrives. 

You can find our previous Legal Updates on the FCA's Consultation Paper and proposed new rules for Non-Financial Misconduct here.

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