Market Conduct: Moving to the Top of the Regulatory Agenda

Transcription

1 Market Conduct: Moving to the Top of the Regulatory Agenda A Presentation by Holly Bakke, Esq. World Bank Advisor Strategic Initiatives Management Group,LLC,stragegicintiativesllc@gmail.com

2 Тавтай морилогтун! Өдрийн мэнд

3 Global Direction Policy makers are now beginning to place a greater focus on market conduct issues and new structures are being established to develop standards and best practices in consumer protection. IAIS 2014

4 The Two Prongs of Financial Regulation Financial Regulation bifurcated into prudential, business conduct. Prudential: capital adequacy, liquidity, solvency risk and procedures for orderly winding down of regulated institutions. Market Conduct: market operations, regulators increasingly use expansive definitions of market integrity, five dimensions: Compliance, Ethics, Deterrence, Accountability and Risk (CEDAR).

5 Market Conduct Defined market conduct: general term insurers/ regulators use to designate activity involving behavior in executing pricing, promotion, service strategies and response to realities of market. market conduct examination: evaluates insurer practices/operations, supervisor conducts examination to assess insurer s market practices, compliance with laws/regulations.

6 Where We ve Been, Where We re Going 2010, G-20 Leaders, Financial Stability Board, Organization for Economic Co-operation and Development, other international organizations focused on consumer protection, moved it up on international regulatory agenda. FSB asked international regulators take lead on global consumer protection, develop recommendations. To drive coordination, IAIS developing/enhancing market conduct supervision, coordinating with other international bodies dealing with market conduct of insurers/intermediaries/ financial consumer protection. IAIS developing Application Paper on Approaches to Conduct of Business Supervision, expected adoption 2014, recently surveyed IAIS members on conduct of business supervision.

7 The FRC and Market Conduct Law provides: insurer/intermediary materials cannot be misleading, false, untrue. FRC may provide market conduct rules for insurers/intermediaries. Focus is on consumer.

8 International Standards ICP 19 Conduct of Business Supervisor sets requirements for conduct of business to ensure customers treated fairly, both before contract and until all obligations under contract are satisfied. applies to insurers/intermediaries. intermediaries key to market growth as face of insurance to consumers. ICP 18 Supervisor sets/enforces requirements for conduct of insurance intermediaries to ensure they conduct business in professional, transparent manner. ICP 20 Supervisor requires insurers disclose relevant, comprehensive, adequate information on timely basis to give policyholders, market participants clear view of business activities, performance, financial position. Expected to enhance market discipline, understanding of risks insurer exposed to and manner in which risks managed.

9 ICP 19: Compliance Requirements Fair Treatment of Customers: 19.1 Supervisor requires insurers/ intermediaries act with due skill, care, diligence Supervisor requires insurers/intermediaries establish/implement policies/procedures as integral part of their business culture. Pre-sale Process 19.3 Supervisor requires insurers consider different types of customers when developing/ marketing insurance Supervisor requires insurers /intermediaries promote products/services in manner that is clear, fair, not misleading Supervisor sets requirements for insurers/ intermediaries on timing, delivery, content of information provided to customers at point of sale Supervisor requires insurers/intermediaries ensure, where customers get advice before concluding contract, advice appropriate taking into account customer s disclosed circumstances Supervisor requires insurers/intermediaries ensure, where customers receive advice before concluding contract, potential conflicts of interest are managed.

10 ICP 19 cont.: Policy Servicing Policy Servicing 19.8 Supervisor requires insurers: -service policies appropriately until all obligations under policy satisfied; -disclose to policyholder information on any contractual changes during contract; and -disclose to policyholder further relevant information depending on type of insurance product Supervisor requires insurers have policies/processes to handle claims in timely, fair manner.

11 ICP 19 cont Supervisor requires insurers/ intermediaries have policies/ processes to handle complaints in timely, fair manner Legislation identifies provisions relating to privacy protection under which insurers/intermediaries allowed to collect, hold, use or communicate personal information of customers to third parties Supervisor requires insurers/intermediaries have policies/ procedures for protection of private information on customers : Supervisor publicly discloses information that supports fair treatment of customers.

12 Lessons Learned From Market Conduct Compliance 10 most common market conduct compliance non-life criticisms: Failure to acknowledge, pay, deny claims within specified times Using unapproved/unfiled forms, rates Failure to provide required compliant disclosures in claims processing Improper documentation of underwriting files Failure to maintain claims documentation Failure to process/pay total loss claims properly Failure to provide required compliant disclosures in underwriting Failure to adhere to producer appointment, termination and/or licensing requirements/adjuster licensing requirements Failure to issue compliant adverse action underwriting notices Failure to apply rates, rules, guidelines correctly Source: Wolters Kluwer Financial Services

13 Questions? Comments?