It’s the most frequent question I’ve been asking my Lloyd’s and London market clients since the turn of the year.

The question itself is testimony to the extent of work that the market has undertaken to design, implement and embed conduct frameworks over the last few years, particularly in relation to delegated authority business. These relatively new frameworks have been working in practice for long enough for the conversation to move towards efficiency and evolution.

It is important that firms now think about how to advance their frameworks to do more of what mitigates actual conduct risk through providing value, insight and assurance, and do less activities that are time consuming and not adding value.

What needs to evolve within conduct frameworks?

I set out below some of the challenges Lloyd’s and London market insurers currently have that require a more value-add and efficient solution:

Processes are manual and time consuming

There is a significant restriction on efficiency, control and insight stemming from manual processes. From inconsistent processes in different business areas; to risk assessments undertaken using 100s of excel spreadsheets, Coverholder due diligence reports in word, information transferred throughout the business using emails and evidence stored in various locations.

Processes not targeted enough

One-size-fits-all conduct risk investigations, such as those undertaken during due diligence of Coverholders, are too broad to focus adequately on the actual conduct risks. There is a risk these become more about evidencing the work that has been done, rather than focussing on mitigating the risk.

MI is now available but it requires quality analysis and judgement to add value

Conduct MI suites are now fully populated with conduct metrics which is testimony to the hard work undertaken in the market over the last few years. However, now that there’s data, it must be properly analysed with the right judgement and context for it to be useful to the Board.

Coverholder audits require greater sophistication around control testing

As the Lloyd’s Coverholder Audit Scope moves from a prescriptive information gathering approach, to an approach focussed on the discipline of control effectiveness testing, there is a need to ensure that these Coverholder audit reports provide robust assurance.


Usefulness of assurance

Now that conduct frameworks are embedded in the 1st LOD, Compliance functions in particular are working out how to add most value through thematic and deep-dive assurance reviews.

Overcoming these challenges is important for conduct frameworks to become fully embedded and add value to firms. This soft market only increases the need for these frameworks to be efficient, streamlined and targeted given the current focus on cost and margin.

Role of technology in driving efficiency

A straight forward solution to remove cost and increase efficiency in conduct risk, as well as delegated authority management more broadly, is through the use of technology.

We have created DART, our Delegated Authority Risk Tool which is an online technology solution for insurance companies to undertake the end to end delegated authority framework, including conduct risk. From underwriters undertaking risk assessments on their tablets at the box, to the automated generation of targeted due diligence scopes and the analysis of dynamic MI. This solution is being deployed in the market and the efficiency and cost gains are significant.

Another option is technology solutions that harness Artificial Intelligence, which can undertake a review of 100s of wordings within minutes.

While technology shouldn’t be pursued for technology’s sake, there are pinch points where technology can allow insurance companies to really advance – whether to become more efficient or gain competitive advantage, or both.

Going back to my opening question – when I ask my clients “Is your conduct framework adding enough value?”– I’m reassured to hear some great examples. Such as Coverholders where actual conduct risk was identified and mitigated, where products were changed to be fairer to customers, or commercial advantage gained due to the ability to manage high conduct risk business.

However, there are just as many examples of inefficiency which should now be addressed. Not least because it appears that financial crime frameworks are now being scrutinised in light of enhancements to conduct frameworks, and the question is quickly becoming “why aren’t you doing financial crime risk assessments like your conduct risk assessments?”


Chris Jamieson – Director, Lloyd’s and London market regulation

Chris leads Deloitte’s Lloyd’s and London market Compliance and Conduct services. Chris has assisted 25 Lloyd’s and London market insurers and numerous brokers/MGAs to create and embed risk-based, proportionate and efficient solutions to regulatory focus areas. This includes conduct risk, financial crime, delegated authority and governance topics. Chris has led the development of Deloitte’s Delegated Authority Risk Tool (DART).

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  • Useful information

    Posted by: lisa on 28/06/2017

  • great information.

    Posted by: maryjane on 29/06/2017

  • Interesting

    Posted by: Kamau on 30/06/2017

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