Beyond Breaches — Compliance as second nature

By Steven Chong — ANZIIF writer | 23 Nov 2020
  • General Insurance
  • Insurance Broking
  • Life Health and Retirement Income
  • Risk Management
  • Claims
financialservicescompliance

With a ream of new legislation, regulations and industry codes, insurance and financial services professionals in our region are bracing for further compliance measures, including disciplinary systems and reporting.

A constructive mindset

But according to industry experts Stephen Meyer, Governance, Regulatory and Training Manager at SURA and Charlotte Aronsen, Manager of Claims Practice & Customer Assurance at IAG New Zealand, successful compliance need not be a burden.

As subject matter experts helping to create Beyond Breaches, a new ANZIIF short course covering the latest regulatory requirements in Australia and New Zealand, they say successful compliance is not just about being across the rules, but also about having a constructive mindset. 

AFSL requirements made easy

For the Australian industry, Beyond Breaches focusses on how new Australian Financial Services Licence (AFSL) requirements will affect general and life insurers as well as brokers.

Stephen Meyer is a veteran of ANZIIF after a lifetime’s career working, teaching and training in insurance at corporates such as QBE, public vocational training at TAFE and private colleges such as Kaplan Business School.

‘I was toying with the idea of a compliance breach course for our staff at SURA in early 2019,’ Meyer says.

‘I’ve been a member of ANZIIF for decades so I looked at the continuing professional education activities it was running and there was a program about compliance breaches but it was from the broking perspective.’

Lessons from life

Meyer contacted ANZIIF about getting the general insurance perspective included.

‘After the General Insurance Code of Practice was launched earlier this year (2020), we reviewed the Breaches activity and changed it to a short course — because managers and leaders get the idea of compliance.

‘The rank and file however, generally don’t fully understand the concept of a conflict of interest, nor reporting needs.’

Having observed generations of people come and go in what was almost a cottage industry of family firms, now a globally corporatised profession, Meyer has earned his right to speak about the ‘rank and file’ with authority.

passion for education and training

In 1977, after finishing high school, Meyer wasn’t ready for university but facing an ultimatum from his father.

‘Just before he returned from an overseas trip, I finally got an offer to “start Monday” in underwriting and reinsurance at South British United,’ Meyer recalls.

‘Eventually I was compelled to gain more qualifications at TAFE, which led to part-time teaching in claims and retail banking once I’d moved to QBE.

‘TAFE lasted 15 years while I also specialised in training at QBE — I’m very pro training and professional development as I see it as an opportunity to reflect my learnings back to the industry,’ Meyer says.

The processes of vocational training have also changed vastly over that time from face-to-face learning, where students could ask questions and pursue tangential issues, to online delivery as for Beyond Breaches.

‘The end result is the same and content is similar but now there is a lack of talking through situations — some learners are more visual, some auditory and some like both for reinforcement,’ Meyer says.

Gut feeling still important

Meyer sees himself as a subject matter expert rather than a generalist, reflecting an industry-wide shift to specialisation as technology has developed to absorb basic and routine procedures.

‘The simple skills of underwriting are disappearing because computer systems do the checking automatically, so human experts do the expertise,' he observes.

‘The downside is that when you go through the learning process of rating a risk and what constitutes a rate, you lose sight of what builds the risk profile.

‘We lose that capability and new entrants to the industry pick up from where we would have 10 years into a career.

Meyer maintains that a gut feeling remains essential in insurance as it can make all the difference between a good and bad risk.

Beyond breaches

Beyond Breaches covers three mandatory subjects on financial services providers; breaches, breach reporting and resolution; the ICA’s Code of Practice and Financial Adviser Standards and Ethics Authority (FASEA)  Code of Ethics; and an elective to choose from general, life or broking.

However, the short course’s learning objectives demonstrate that it isn’t merely chapter and verse of definitions, processes and penalties.

Ultimately, students learn to consider the consequences of every interaction with customers and know what a good customer outcome looks like. They will discover the value of providing services that are fit for purpose and how to behave ethically and fairly when making decisions.

Broadly speaking, then, beyond breaches is a culture rather than mere practice of compliance, developed as the financial services provider engages with the customer’s point of view and develops empathy.

‘Compliance is a real challenge,’ says Meyer. ‘AFSL holders and their employees and representatives must be compliant, so the challenge is to move from “I have to do it” to “I need to do it” in a voluntary and positive way — so the journey feels less obligatory.’

Box ticking no longer cuts it

Meyer explains that doing the bare minimum of box-ticking to ‘get over the line’ should flip to willingly maximising compliance in a process of upskilling all conscientious professionals would be expected to undertake.

‘In our industry we have to do 25 hours professional development annually — that’s the minimum, but to go above that is best practice, even if the grading is just a binary competent-non-competent.’

Meyer acknowledges that the AFSL compliance requirements will mean more pressure on the organisational capacity of individuals, teams and companies.

‘Once you might have been able to wing it and now you can’t — there’s too much in the scope of the regulator where they can send a “please explain” for there to be any easy ways out or shortcuts,’ he warns.

breaches are inevitable

An increase in breaches is therefore inevitable and what’s crucial is learning from them — understanding what happened and what could be done to prevent them happening again, he adds.

While a breach in AFSL obligations has more serious ramifications and penalties than breaches of industry codes, Meyer says the legal breach incident may distract from the process that led to it, so allowing a dysfunctional workplace culture to become normalised.

However, as parts of the General Insurance Code of Practice become legally enforceable with financial and criminal penalties, Meyer cautions that Code elements lacking legal sanction must be given as much importance both in training and in practice.

Although all Code signatories have until 1 July 2021 to be fully compliant, a publicly available policy to support customers affected by domestic violence has been mandatory since 1 July this year.

NEW ZEALAND PATHWAY

Financial advice regulatory changes in New Zealand come into effect slightly earlier than in Australia on 15 March 2021, as a similar mix of legislated and industry-developed codes.

These include the Code of Professional Conduct for Financial Advice Services, the Fair Insurance Code and the Insurance Brokers Association of New Zealand (IBANZ) Code of Professional Conduct.

Beyond Breaches therefore includes a dedicated stream for New Zealand financial service providers to update them about imminent changes.

workplace reality

Charlotte Aronsen, Manager of Claims Practice & Customer Assurance at IAG’s Christchurch office, has reviewed the course content as a subject matter expert as she leads the team that completes IAG's internal complaints process.

Internal dispute resolution is a common element to all the incoming codes, so Aronsen's experience is anchored in contemporary workplace reality.

‘We not only need to know about legislation and local codes of practice to fully review our complaints, we must also understand our obligations from a reporting and compliance perspective,’ says Aronsen of her team.

Although she doubts the New Zealand insurance sector has the same level of regulation and reporting as Australia, lessons from the Hayne royal commission were not lost across the Tasman.

Setting standards

Aronsen expects the deepest impact to come from the new financial advice regime, which changes who is allowed to give financial advice within the financial services industry and prioritises clients’ interests, as well as setting standards for conduct.   

On reviewing the ANZIIF Beyond Breaches course content for New Zealand, Aronsen says she found it easy to understand and comprehensive when accompanied with information on wider compliance obligations for both general and life insurance. 

‘The short course also compares codes with legislation and the role of code compliance committees — there are a number of links to relevant additional material if participants want to learn more,’ she adds.

‘Reviewing the course was a great opportunity for me to broaden my own knowledge across these areas so I am better informed around these changes and what they mean for our organisation.’

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