UK General Group CEO Peter Hubbard on regulation

C-Suite - MGA: Getting your hands dirty  

The recent FCA review has left no doubt of what the regulator expects – and MGAs must take heed.

The conclusion of the Financial Conduct Authority’s delegated authority thematic review grabbed plenty of headlines but, in truth, the regulator has simply reaffirmed what it expects in terms of oversight and control and these expectations should already be in place within brokers and managing general agents.

Principally, the FCA’s focus is on consumer outcomes and this extends to the recent review of commercial claims, too. Brokers and MGAs could hardly claim to have missed the clarion cry from Canary Wharf to treat customers fairly.

Progressive MGAs and brokers will have anticipated the regulatory agenda and reviewed their audit and compliance focus by concentrating on conduct risk management information, including complaints, cancellations and customer satisfaction data, and thereby reflecting the stress placed by the regulator on delivering good customer outcomes.

Regulation and audit teams need to show high awareness of the business they monitor. They need to get their hands dirty and look down, through and across distribution channels rather than sitting at a lofty height. As well, risk monitoring needs to be comprehensive with plans covering people and procedural audits, and contractual obligations.

In a customer-centric world, capacity providers need to have a high degree of trust in their MGA partners. This includes a clear understanding of protocols within binder agreements, regular interaction between the two parties, and trust in the MGA’s internal audit and MI processes.

The likelihood is insurers will continue to chase scale. The recent mega-merger between Ace and Chubb is unlikely to be the last of its kind, even in the short term. The reasons behind these scale-plays are many and various but, as insurers get bigger, the role of MGAs will also grow and evolve giving insurers niche and specialist distribution capabilites they cannot manage themselves.

The FCA acknowledges this self-evident truth – that MGAs fulfil a key distribution capability role, particularly in niche and specialist lines. All it is asking is that MGAs, and brokers, live up to the same customer standards that are applied to the rest of the industry. If you didn’t see this coming, you shouldn’t be in 
this business.

Peter Hubbard
Group CEO, UK General