They're watching you.........

The FCA's long-awaited report into Add-on insurance has been published today (11 March). There is plenty of speculation behind the delay in making the report public - of which more in a later blog, but the industry has until 8 April to respond to the FCA's proposed remedies, highlights of which include forcing insurers to report loss ratios, removing pre-ticked boxes, reforming the sale of GAP insurance, and improving the sales process for add-ons on price comparison sites. 

Big fines for regulatory breaches are becoming the stuff of everyday newspaper journalism, and the reputational fallout from a fine can impact share price and business growth. Just ask Homeserve, Swinton, CPP and a host of other providers who've been on Tracy McDermott's naughty step in recent years. And, as the FCA continues to ramp up its scrutiny of the industry, turning its attention to claims (a political hot potato follwing the winter floods), how can companies respond to regulatory breaches? Euan Sutherland, the embattled CEO of the Co-op has discovered that when things go wrong, it is the leader who must assume responsibility, not assign responsibility [to someone else]. 

Certus has created a guide for leaders to manage the fallout from a regulatory breach. The key points in the guide are as follows:

Point One: Reputational damage hits you (and your shareholders) in the pocket. Don’t take my word for it, you just need to read the newspapers.

Point two: The impact on brands damaged by big fines has grown commensurately as a result of broader changes in the ‘reputation environment.’

Point three: Fines for regulatory breaches are not just the preserve of banks. They are common currency in the insurance industry too.

Point four: And…. following a regulatory breach, it is not just the fine which hits the business

Point five: There are no exceptions to the rule that regulatory breaches spell potential disaster for a brand. However, it is the response strategy that determines how well and how quickly a reputation can be restored.

Point six: While the focus of this guide is how individual businesses respond to the cost and consequence of a major fine, we cannot avoid the impact of regulatory breaches and massive fines on the reputation of the industry as a whole.  

In conclusion:

It’s the CEO who must lead a company’s overall reputation strategy, ideally with the support of a board committee focused on it. This may seem like a lot of firepower, but in today’s climate, with reputational issues threatening both shareholders and a company’s ability to achieve broader goals, that degree of high-level attention and integration is essential.

In a 2011 insurance CEO survey conducted by the ABI and KPMG, 57 UK insurance CEOs were questioned. They said the reputation of the industry was its greatest weakness. They cited the second greatest weakness as the way the industry interacts with customers.  Regulatory breaches and big fines underpin our greatest weakness, but in truth they are a consequence of our second greatest weakness.

In other words if the insurance industry gets the second bit right, we’ll also resolve the first.

For a copy of the full guide to managing a regulatory breach, please email benwelsh@certuscc.com