REG Reviews
2nd June 2023
Last month, FCA’s commission crackdown turned the spotlight on binders, BIBA released ‘Brokers Guide to ESG’, ‘ghost broking’ incidents are worryingly rising and CEO, Paul Tasker, sat down with Insurance Age to talk all things RegTech and how regulation technology is transforming the insurance sphere.
Read these articles and many more, as we bring you all the important news and views from the insurance and financial services world…
The BoE and PRA have released their consultation paper on the approach to Enforcement policies to “provide greater clarity on the scope of its powers and processes.”
Released on 4th May, these changes aim to enhance clarity, ease of use, and efficiency, introducing new options for expedited investigations and cooperation, as well as improved settlement discounts.
The proposed amendments offer a comprehensive framework that aims to streamline the enforcement process and provide clearer guidelines for subjects of investigations.
One key proposal is the introduction of a new route for early cooperation, enabling subjects to engage with authorities at an earlier stage, potentially leading to faster investigatory outcomes.
The proposal also includes an enhanced settlement discount of up to 50% for early admissions, incentivising subjects to proactively address and resolve issues.
In addition to the changes to enforcement policies, the consultation paper also outlines proposed revisions to the PRA’s policies and procedures for making supervisory and other statutory notice decisions.
These changes are intended to improve the decision-making process and ensure consistency in non-enforcement related supervisory decisions.
The proposal introduces updates to the Bank’s Enforcement Decision Making Committee’s (EDMC) procedures, which will contribute to a more efficient and effective enforcement regime.
To facilitate clarity and ease of reference, the paper will establish two separate policy documents.
The first document will present a consolidated statement of policy outlining the approach to enforcement, while the second document will focus on the PRA’s decision-making allocation and approach to non-enforcement related supervisory decisions.
The proposed amendments aim to:
Enable early cooperation, speeding up investigations and increasing senior manager accountability
Provide an enhanced settlement discount of up to 50% for early admissions
Enhance clarity by consolidating enforcement policies and procedures into a comprehensive document
Clarify the approach and procedures for Financial Market Infrastructure enforcement investigations
Improve consistency in financial penalties for PRA-regulated firms and update serious financial hardship thresholds for individuals
Separate and update the PRA’s policy and procedures for non-enforcement related statutory notice decisions
Enhance the operational efficiency of decision-making by updating the EDMC’s remit and procedures
Sam Woods, Deputy Governor for Prudential Regulation and CEO of the PRA, said; “The changes we are consulting on include the creation of options for quicker investigatory outcomes, by providing a new route for early cooperation and increased incentives for earlier admissions by subjects.”
Feedback to the proposal is required by 4th August. The BoE have also announced the hosting of a series of in-person roundtable discussions in June, where external stakeholders will be able to engage in further meaningful discussion around the proposed changes.
The UK government has initiated a review of the artificial intelligence (AI) market to ensure equitable access to its benefits and prevent any one company from monopolising the industry.
The investigation, led by the competition watchdog, will specifically examine the software used in chatbots, including systems like ChatGPT.
The rapid advancement of AI technology, which aims to replicate human behaviour, has raised concerns about potential job displacement, privacy issues, and the spread of misinformation.
The review seeks to address these concerns and ensure responsible development and deployment of AI in the UK.
The Chief Executive of the Competition and Markets Authority (CMA), Sarah Cardell, stated that ChatGPT type software had the potential to “transform the way businesses compete as well as drive substantial economic growth”.
However, she also emphasised the importance that the potential benefits should be “readily accessible to UK businesses and consumers while people remain protected from issues like false or misleading information”.
This follows the recent resignation of the ‘godfather of AI’ Geoffrey Hinton from Google who implied he regretted his work.
Although his age also played a factor in his retirement, Hinton discussed the danger of AI describing them as “quite scary”.
“Right now, they’re not more intelligent than us, as far as I can tell. But I think they soon may be,” he added.
Dr. Hinton’s groundbreaking work on neural networks and deep learning has revolutionised the development of AI systems such as ChatGPT.
Neural networks, a key component of artificial intelligence, mirror the learning and information processing mechanisms of the human brain. They enable AI systems to acquire knowledge through experience, a process known as deep learning.
The esteemed British-Canadian cognitive psychologist and computer scientist also expressed his belief that chatbots have the potential to surpass the information capacity of the human brain in the near future.
Dr Hinton stated; “Right now, what we’re seeing is things like GPT-4 eclipses a person in the amount of general knowledge it has and it eclipses them by a long way. In terms of reasoning, it’s not as good, but it does already do simple reasoning.”
“And given the rate of progress, we expect things to get better quite fast. So we need to worry about that.”
The founder of the advertising companies WPP and S4, Sir Martin Sorrell, discussed the potential for “AI to cause industrial revolution” and “another major shift in technology , rivalling, maybe even more significant than the iPhone and similar developments.”
In his remarks, he also pointed out the current domination of the AI industry by two major companies: Microsoft, the owner of ChatGPT, and Google, which has introduced its own competing chatbot named Bard.
Sir Martin emphasised the UK Competition and Markets Authority’s (CMA) proactive stance in preventing excessive market power among tech firms.
The Federal Trade Commission (FTC), the competition watchdog in the United States, has joined the call for stricter regulations on AI.
On 7th May, BIBA published a new guide on ESG for BIBA members to commit to pledges outlined in its 2023 manifesto, that promised to assist brokers on their journey towards Environmental, Social, and Governance (ESG) practices.
Recognising the increasing importance of ESG issues, the guide seeks to provide guidance and support to its members to navigate the evolving landscape.
The Financial Conduct Authority (FCA) has urged firms to prioritise ESG initiatives.
In February, the FCA emphasised the need for businesses to adapt and align their priorities with the changing environmental requirements for a more sustainable world. As a result, companies across various sectors are facing mounting pressure and scrutiny from stakeholders to demonstrate their understanding and actions related to ESG.
In collaboration with reputable law firm, Weightmans, BIBA has undertaken the task of showcasing the significance of ESG considerations to its diverse range of members.
By working closely with Weightmans, BIBA aim to convey the inherent business value and benefits associated with embracing ESG principles.
Together, they have developed an informative online guide, which provides practical insights and actionable steps for brokers to incorporate ESG into their operations.
This comprehensive online guide is designed to evolve alongside the shifting priorities in the ESG landscape. BIBA has confirmed that the guide is dynamic and will be regularly updated and amended to align with the latest developments.
It takes its members on a journey, starting with understanding the importance of ESG and gradually progressing towards developing and implementing an ESG plan and objectives.
The guide also offers guidance on monitoring, reporting, and continuously improving ESG practices.
BIBA recognises that ESG considerations are no longer optional but vital for businesses to thrive in today’s world. By equipping brokers with the necessary knowledge and tools, BIBA aims to empower its members to address ESG challenges effectively and seize the opportunities they present.
“This ESG guide is for members who like BIBA want to start an ESG journey and, by doing so, work towards more sustainable business operations,” commented Steve White, BIBA CEO.
“Our aim is to help members understand the direction of travel on ESG and support them in integrating ESG into their businesses whatever stage of implementation they may already be at,” he continued.
Nick Barker of Weightmans added: “Effective ESG integration starts by getting the governance right, this guide provides the tools to lay a solid foundation of ESG governance before exploring specific ESG Stepping Stones.”
The guide acts as a valuable resource whereby brokers can not only contribute to a more sustainable future but also enhance their own business prospects. A mini-infographic version has also been released to encourage engagement with the strategy.
Regulatory experts suggest that the recent FCA crackdown on property commissions may just be the beginning, with binding authority arrangements expected to face scrutiny next.
Compliance firm, ICSR, has closely examined the FCA’s consultation paper on leaseholder reforms and identified widespread market failure by insurance firms.
As a result, Compliance Director, Natalie Dick, of ICSR believes that the FCA will delve further into brokers’ commission arrangements, particularly focusing on distributors who receive higher commissions when premiums increase, without any additional work being done.
Following the FCA leaseholder consultation, ICSR Consultant, Palak Bedi, wrote in a regulatory update that; “The most significant concern for brokers and MGAs will be the comments aimed directly at the practice by which brokers commission increases in line with premium increases, because the commission percentage remains the same.”
“This practice is embedded in the remuneration arrangements across the market. The FCA is effectively asking the question why that is the case.”
“In their view, an increase in the premium by the insurer does not mean that the workload of that broker has increased, so why should the absolute level of their income?”
“The intermediary would be required to effectively reassess whether the ultimate policyholder is receiving value,” Bedi added.
Another compliance expert commented; “For the moment, the issue is limited to the particular circumstances which relate to property insurance, but the possibility that it might be applied more widely should cause concern for the insurance market as a whole.”
“As a minimum, firms needing to consider value and undertake value assessments need to take the issue into account and identify how they may respond if asked the question of why value remains when commissions have automatically increased in line with the premiums, but no further work was required for that increased commission.”
The recent crackdown on property commissions has been attributed to the excessive profits made by large brokers in the industry.
The FCA is set to implement a nearly complete ban on commission payments within the property chain.
Ketan Patel, the Managing Director of Artemis Insurance Brokers, highlighted that the issues within the market stem from the actions of these prominent players, who have been generating “silly amounts of money.”
When discussing both brokers and managing agents, Patel stated; “We all know the earnings they’ve been accustomed to, and on top of that, they charge fees.”
Following the review of property commissions, the FCA is now contemplating conducting additional investigations into captives.
“Regulatory scrutiny of commission and fee arrangements is escalated as it is an integral part of looking at Consumer Duty and Fair Pricing. For firms to demonstrate governance and oversight throughout their distribution chains is a step in the right direction – that is that the market is aligned with the regulatory to remove unfair and greedy practices without damaging the revenue streams needed to perform a regulated role effectively.”
The surge in ‘ghost broking’ incidents is contributing to an increase in policy fraud, prompting demands for stricter regulations to protect vulnerable customers on social media platforms.
LV reported a 31% rise in policy fraud cases from the fourth quarter of the previous year to the first quarter of 2023.
The underlying cause of this increase is a staggering 143% surge in referrals of ‘ghost broking’ cases to the police.
This substantial rise in ghost broking referrals was measured on a year-on-year basis between 2021 and 2022, and it was reported to the Insurance Fraud Enforcement Department at the City of London Police.
‘Ghost brokers’ are individuals who masquerade as online insurance brokers, frequently using social media platforms, or they rely on word-of-mouth referrals within local communities to deceive and sell counterfeit insurance policies to motorists.
The Director of Financial Crime at LV General Insurance, Ben Fletcher, cautioned that social media regulation needed to be tightened.
He stated; “We’re working hard to proactively detect and disrupt the issue of ghost broking, protecting the victims and our customers.”
“However, we need tougher regulations across social media platforms to protect vulnerable people and prevent the continued rise of ghost broking.”
“There are so many different types of insurance fraud, so it’s crucial we help educate consumers about emerging trends and provide top tips to help them spot the signs.”
“Our people, data and fraud intelligence- sharing play a crucial role in coming together to combat insurance fraud and we continue to invest and update our systems and controls to help protect genuine customers,” he added.
Based on the findings of the Insurance Fraud Bureau, it has been revealed that over the course of the last year, a over 55,000 cases of fraudulent motor insurance applications have been uncovered, with many of these case associated with ‘ghost broking’.
Improved detection capabilities of relevant agencies may have played a role in this heightened identification of fraudulent activities.
Head of Intelligence, Investigations and Data Services at the IFB, Jon Radford, stated; “ The significant financial pressure that so many people are facing is sadly providing fertile ground for ghost brokers.”
“Ghost broking is a serious problem and we’re determined to tackle it. We’re actively investigating suspected ghost broking fraud networks in collaboration with police and insurers to protect more people from falling victim.”
Furthermore, Aviva also reported in November last year that there had been an increase in fraud, with ‘ghost broking’ accounting for 15%.
Through October of last year, the provider took decisive action by blocking over 23,300 motor insurance applications that were either fraudulent or deemed suspicious. surpassing 20,000 applications identified in the year before.
Aviva also highlighted that this surge in fraudulent activity coincided with the cost of living crisis continuing to affect individuals and households.
The Association for Financial Markets in Europe (AFME) has issued a response to the FCA’s recently published proposed rule changes concerning the UK’s framework for listing equity shares of commercial companies.
These discussions were initiated in July 2021 and resulted in a discussion paper released in May 2022, which suggested the implementation of a single listing segment model for equity share issuers.
The FCA stated that these changes “aim to rebalance the regime and improve the competitiveness of the UK equity market,” and make listing shares in the UK an “attractive and compelling option.”
Managing Director of Equity Capital Markets at AFME, Gary Simmons, commented on the changes, saying that; “These are welcome proposals. In particular, we welcome the intention behind the proposed single listing segment, which builds upon the FCA’s proposed disclosure-based approach to financial information, and will replace the more prescriptive rules requiring, for example, a three-year revenue track record.”
“This will provide more flexibility for companies to tailor their disclosure to their own particular company or circumstances and to provide investors with more relevant information on which to make their investment decisions.”
“Implemented properly, we believe that these changes will help to make the listing process simpler and more flexible and also provide greater transparency between issuers and investors.”
Moreover, AFME’s Equity Trading report for Q1 2023 revealed a 70% year-on-year growth in equity underwriting on European exchanges. However, this growth was primarily driven by the low issuance figures observed in 2022. When compared to the two and five-year quarterly averages, Q1 2023 experienced a 20% decline.
During the quarter, IPOs recorded a cumulative deal value of €1 billion, reflecting a significant 48% decrease compared to the previous year. Notably, two out of the 16 deals accounted for 80% of the total issued amount. The London Stock Exchange experienced its lowest deal value for IPOs since 2009.
The Head of Equities at AFME, April Day, stated; “Listing rules are only one part of the solution to boosting liquidity. It is important to remember that healthy primary markets are underpinned by vibrant secondary markets, and declining liquidity will not go away without action to ensure competitive secondary markets.”
“In this respect, the outcome of the MiFIR review in Europe will be critical, including an ambitious, deep, pre-trade consolidated tape, to help boost liquidity and position Europe as an attractive investment destination.”
The surge in ESG-focused ETFs has raised regulatory concerns over potential “greenwashing” by fund managers. There are worries that misleading environmental claims may be used to attract investors, undermining transparency and credibility in the industry.
Exchange traded funds (ETFs) incorporating ESG metrics as a basis for investment decisions have become a significant growth driver for asset managers.
With more investors seeking strategies that align with their values and generate positive impact, these ESG-labelled ETFs have witnessed significant growth.
According to ETFGI, a consultancy based in London, the number of ESG-labelled ETFs has more than doubled over the past two years, reaching nearly 1,300 by the end of 2022.
However, these ESG ETFs vary in their approaches. They range from “dark green” funds, which prioritise alignment with the Paris Agreement’s 1.5°C global warming target, to index trackers that still maintain substantial exposures to fossil fuel companies.
Additionally, there is a wide array of thematic ESG ETFs that focus on specific ESG priorities.
According to ETFGI, global assets invested in ESG ETFs reached $394 billion by the end of last year, with net investor inflows of $74.7 billion in 2022.
However, this was significant decline of 54.5% compared to the $164.3 billion gathered in the previous year, surpassing the overall 33.7% drop in net inflows for the entire ETF industry.
The decline in new business for ESG ETFs indicates that the ESG standards debate and criticism from US Republican politicians have affected investor demand.
Republican governors from 19 states have raised concerns about ESG investing, citing antitrust, consumer protection, and discrimination issues.
Fund managers also face challenges in designing ESG products due to incomplete company disclosures on environmental data and evolving regulatory requirements.
Additionally in Europe, asset managers like BlackRock, Amundi, and UBS have withdrawn certain ETFs from the EU’s strictest ESG category, known as “Article 9”, due to concerns about potential accusations of greenwashing.
These actions reflect their commitment to transparency and avoiding misleading environmental claims.
In response to the downgrading of the majority of ETFs tracking Paris-Aligned Benchmark (PAB) and Climate Transition Benchmark (CTB) indices, the European Commission has issued a clarification.
Under the new guidelines, fund managers are now authorised to conduct their own assessments for sustainable investments and are required to disclose their methodology to ensure transparency.
European financial regulators have proposed additional changes to disclosure and reporting requirements for sustainable investment products.
These changes would mandate investment products labelled as “sustainable” to provide more information on decarbonisation targets and the strategies to achieve them.
In the UK, regulators are taking precautions to address the challenges faced by the ESG market in Europe.
The FCA is consulting on the implementation of new consumer-friendly labels for sustainable investments. The FCA has also proposed restrictions on the use of terms like “green” and “ESG” in fund marketing documents by investment managers.
Furthermore, in March, the FCA issued a strong warning to index providers about their contribution to greenwashing practices, highlighting widespread deficiencies in ESG-related disclosures.
The FCA has since expressed the need for formal regulation of ESG ratings providers.
The FCA reported that the average processing time for five key authorisations that impact brokers in 2022-23 met the FCA’s target timeframes. However, there is still progress needed to reach the statutory requirement of 100% compliance in all cases.
According to the latest data, the FCA approved 92.5% of Senior Management and Certification Regime (SMCR) applications within its legal target between January and March.
The FCA has a three-month timeframe to deliver the SMCR service, and although the figure fell short of the 100% goal, it showed improvement compared to the previous quarter (87.9%) and the full financial year (74.8%).
The FCA has switched to quarterly reporting and, for the first time, has revealed the average number of days taken for authorisations.
For SMCR approvals, it was reported the average processing time in the quarter was 41 days, comfortably within the three-month limit.
In the fourth quarter of the 2022/23 financial year, new firm authorisations showed improvement with a rate of 94.8%. The annual achievement for new firm authorisations was even closer to the 100% milestone, reaching 97.8%.
The FCA has a six to 12-month timeframe to process complete applications for Part 4A permissions, and on average, it delivered within 110 days.
The FCA took the same statutory timeframe for processing complete applications from authorised firms for variation of permission as it does for new firm authorisations.
In this category, the FCA achieved an impressive 99.7% approval rate in the final quarter, bringing the full-year figure to a commendable 99.8%, almost reaching its goal of 100%.
The average processing time for these applications was even shorter than that for new authorisations, standing at just 84 days.
While most categories of authorisations saw improvements, the only category that experienced a decline in the quarter was approved persons under the appointed representative regime.
The FCA fell short of its statutory requirement to deliver approval in 100% of cases within three months. The success rate for the quarter was 82.8%, down from 94.7% in Q3, resulting in an overall annual result of 91.1%. However, the average processing time of 25 days meant that most applications were handled within the necessary timeframe.
The FCA stated that the decline in in processing AR-related applications for approved person was “due to a large number of applications being submitted before the applicant had the necessary permissions so the applications could not be determined.”
“The applicant subsequently withdrew the application for permissions and the associated approved person applications after the deadline.” Excluding those applications, the FCA’s performance would have been approximately 95%.
The processing of changes in control improved to 99.2% in the quarter, meeting the 60 working days timeframe. The annual performance reached 98.9%, coming close to the 100% benchmark.
The FCA’s data for the final quarter of 2022/23 demonstrated ongoing progress in meeting its service level targets.
The regulator reported; “Our performance has improved following significant investment, hiring 159 extra staff in the past two years, and through better use of technology and data to automate parts of the process.”
“The increasing complexity of some cases means that we will not always meet our statutory targets. In these cases, it is right that we take the time to make sure there is greater scrutiny and engagement with the firms involved. We also continue to see too many incomplete and poor quality applications.”
Speaking at the Cyber session at the BIBA Conference 2023, the CEO of the National Cyber Security Centre, Lindy Cameron, warned businesses to focus on setting up reliable defence systems, instead of paying ransom to cyber criminals.
Cameron emphasised the importance for medium to large businesses to be vigilant against cyber hackers who are increasingly targeting them for ransom. It is crucial for companies to implement robust systems and measures to safeguard against cyber attacks.
Cameron stated; “Fundamentally, cyber criminals want to make money, so they will be looking for opportunities. In this case, they will find ways to persuade you [companies] to pay a ransom to get your data.”
She then discussed the harm cyber criminals could cause and how this leads many businesses to believe that it would be simpler to pay ransom.
However she added; “We think that most organisations could defend themselves, whether they are small or big companies.”
During the talk, she requested businesses take the time to consider what could go wrong, the data that might be lost and which systems they could afford to function without for certain amount of time.
She commented; “Businesses need to think about how they can prevent attacks and how to do the basic cyber hygiene in order to feel confident. For example, I’ve got two-factor authentication enabled in key systems. I’ve got admin and access protected appropriately to make sure somebody can’t really hack through that.”
Following a question from Graeme Newman, CEO of CFC, about the consequences of paying ransom, Cameron stated; “I try to make it very clear that if businesses in the UK do pay ransom, then that will give criminals an incentive to look to the [country] as a lucrative source of revenue. In my ideal world, nobody would pay ransom, particularly in the UK.”
Newman highlighted that businesses with cyber insurance are less likely to incur financial losses compared to those without coverage, based on growing empirical evidence.
In her response, Cameron stated; “That is because it gives businesses a reason to check their cyber risks, to go through their policy and tick off all the possible threats. We don’t want every small business to have to be an expert in cyber risk, we want them to be able to check through their risks. That means they are much less likely to become a victim or to be able to recover quickly if they are subject to an attack.”
On 25th May, REG’s own CEO, Paul Tasker, spoke to Insurance Age about the growing need for regulation technology within the insurance sector and REG’s exciting new developments that are continuing to transform the future of risk management.
Paul discussed REG’s position within the market, with many customers being international but majority being located in the UK.
In the UK, the FCA are placing significant emphasis on the distribution chain to ensure adequate oversight and monitoring.
The regulator’s concerns have heightened following its discovery of widespread failures within the buildings insurance sector.
A lack of evidence demonstrating insurers’ oversight of commissions and remuneration practices, following an investigation by the FCA into buildings insurance and leaseholders involved examining insurance firms, 13 brokers, and three managing general agents.
Paul discussed where REG may help in this and stated; “What attracted me to REG is that there was a challenge the market was facing and REG does satisfy that.”
“In terms of innovation, we have to be one step ahead, because we specialise in looking after insurance businesses. We need to know what their challenges are going to be coming down the line.“
“One of the biggest things that we’ve seen is around supply chains, or distribution chains, as we often refer to in insurance. What I mean by that is not only having diligence over your first parties that you trade with, but everyone beyond them. There’s a big challenge around actually gathering data from every link in those chains.”
With growing industry interest around AI, Paul also spoke about how REG has been using AI to develop our systems and how it will be integrated.
AI will be used to analyse date and recognise potential risks, which will be given to customers alongside a risk scoring system.
Paul stated; “The other thing we’re doing is building intelligent bots. They can actually do a lot of this data gathering instead of people having to do it.”
“That’s the real sort of innovative piece we have, bringing that AI capability to clients. All the data we pull together, our software analyses it and reports on variances, it raises flags if it sees diminishing risks,” he added.
“We’re talking about the future here, and where it is going is almost being able to predict risk.”
“The traditional way is that you read about something going wrong in the paper. What we do now is alert you the minute things are going awry.”
“The AI is pulling the data together and saying we think in September there is a likelihood the business can have a problem.”
Paul also discussed REG’s API integration capabilities, allowing seamless connectivity with other technology systems, such as broking software houses.
“One of the key challenges facing business now is the integration of software platforms. We’ve moved away from those big enterprise systems and people are quite rightly using best-in-class SaaS [software as a service] solutions.”
“So you might have one like ours, like Broker Insights. You have all these different things but integrating them is a key challenge.”
Looking to the future, Paul commented on REG’s next move into the financial services industry.
“We’ve made some brilliant traction in the insurance market. More and more people are joining us all the time, but there are some quite long sales cycles.”
“We accept that insurance is lagging behind in some areas of tech. And as people catch up, they join us.”
“But there there are several other very similar markets, or adjacent verticals as we would call them, that have exactly the same challenges as insurance markets.
“For those financial services industries we’re looking to roll our product out very shortly because they face the same challenges. They are highly regulated, there’s financial crime risk, risk of supply chain failure. We’ll be working with private equity businesses, asset management.”
“There’s a bigger market for us to run at.”
Meta, the owner of Facebook, has been fined €1.2bn (£1bn) by Ireland’s Data Protection Commission (DPC) for mishandling user data during its transfer between Europe and the United States.
This fine represents the largest penalty ever imposed under the EU’s General Data Protection Regulation (GDPR) privacy law.
The GDPR outlines the regulations that companies must adhere to when transferring user data outside of the European Union.
Meta has expressed its intention to file an appeal, disagreeing with the DPC’s findings and deeming it “unjustified and unnecessary.”
At the core of this decision lies the utilisation of standard contractual clauses (SCCs) to facilitate the movement of European Union data to the US.
The legal contracts designed by the European Commission aim to safeguard personal data during its transfer outside Europe.
However, there are concerns that these measures may not adequately protect Europeans’ data due to the weaker privacy laws in the United States, as well as the potential access to the data by US intelligence agencies.
The Information Commissioner’s Office stated that the decision “does not apply in the UK” and noted that more details about the decision were still to come.
Many large companies have intricate networks of data transfers, involving sensitive information such as email addresses, phone numbers, and financial data, to international recipients. These transfers often rely on the use of standard contractual clauses (SCCs).
Meta suggested the fine was unjust due to their broad use.
Nick Clegg, Facebook’s president stated; “We are therefore disappointed to have been singled out when using the same legal mechanism as thousands of other companies looking to provide services in Europe.”
“This decision is flawed, unjustified and sets a dangerous precedent for the countless other companies transferring data between the EU and US.”
In 2013, Edward Snowden, a former contractor for the US National Security Agency, revealed that American authorities had accessed individuals’ information through technology companies like Facebook and Google.
This led privacy campaigner, Max Schrems, to challenge Facebook legally, claiming that the company had not adequately safeguarded his privacy rights. This initiated a decade-long legal battle over the legality of transferring EU data to the US.
The European Court of Justice (ECJ), Europe’s highest court, has consistently stated that the US lacks sufficient safeguards to protect Europeans’ data. In 2020, the ECJ invalidated an EU-to-US data transfer agreement.
However, the ECJ allowed for the use of standard contractual clauses (SCCs), stating that data transfers to any other third country would be permissible as long as it ensured an “adequate level of data protection.”
Meta, in this case, has been found to have failed that standard of ensuring adequate data protection, resulting in the imposed fine.
The US has recently made updates to its internal legal protections, these updates aim to provide greater assurances to the EU regarding the safeguarding of transferred data.
Speaking at the recruitment session at the 2023 British Insurance Brokers’ Association conference in Manchester, Matt Green, the CEO of IDEX Consulting, emphasised that the insurance industry is not facing a talent shortage, as recently speculated.
“If you have walked around the conference, then you can see the quality of people that are in the industry. Our first challenge is to bust that lack of talent myth.”
Instead, he highlighted that the challenges in recruitment predominantly stem from employers themselves.
Green cautioned that businesses in the insurance sector are encountering difficulties by imposing strict office-based working requirements, while potential candidates increasingly seek hybrid work arrangements.
This misalignment between employers and job seekers’ preferences creates complications in the recruitment process.
The evolving nature of work, driven by changing expectations and advancements in technology, has resulted in a growing demand for flexibility.
Candidates aspire for a work environment that combines the benefits of both remote and office-based work. Hybrid work arrangements provide employees with the flexibility to balance their personal and professional lives effectively.
Green’s remarks shed light on the importance of adapting recruitment practices to align with the evolving preferences of candidates.
Employers in the insurance industry need to recognise the appeal of hybrid work models and consider accommodating these preferences to attract and retain top talent.
Diversity was also flagged as a major hurdle regarding attracting talent. Green voiced concerns over clients urges for diverse candidates whilst they also require contenders to have extensive experience.
“Clients want people with 10 to 15 years’ experience from a diverse background. The problem is that 10 to 15 years ago, there was not a spotlight on this issue that there isn’t a diverse talent pool. This will be another challenge for the industry.”
Agreeing with Green, Alan Vallance, CEO of the Chartered Insurance Institute, proposed apprenticeship schemes as a viable solution to overcome the recruitment crisis.
“As an industry we need to get people to think differently about apprenticeships; they are not just for young people. We have just employed a sustainability director, and he was using the apprenticeship levy to pay for a Masters in sustainability.”
“There is a misconception that it is age restricted. It can definitely help bring experienced people into the business.”
As the insurance industry continues to navigate the post-pandemic landscape, it is crucial for businesses to address the changing dynamics of work and embrace innovative approaches to recruitment.
By aligning their practices with the evolving needs and expectations of candidates, employers can overcome recruitment challenges and ensure a thriving talent pool within the industry.
“In a rapidly changing world, the insurance industry must adapt and embrace diversity in its talent pool. By recruiting people from different backgrounds and experiences, insurance companies can harness the many benefits of diverse perspectives, creativity, and improved customer relationships. A commitment to diversity and inclusion not only makes good business sense but also strengthens the reputation of insurance organisations in the long run. Insurance companies that prioritise diversity send a message to their employees and customers demonstrating their commitment to fairness and equal opportunity. This reputation attracts top talent and helps build strong relationships with clients who value inclusivity.
Moreover, hybrid working has brought about significant changes in the way insurance companies approach recruitment. Embracing remote work has widened the talent pool and redefined job descriptions. As the insurance industry continues to adapt to the new normal, a flexible and innovative approach to recruitment will be key to attracting and retaining top talent, with a focus on results and adaptability rather than physically being in the office.”
On 6th June 2023, REG’s CEO, Paul Tasker and Head of Sales, Victoria Slade, attended The British Insurance Brokers Association (BIBA) 2023 Annual Conference in Manchester.
BIBA is the UK’s leading general insurance organisation and this year’s conference was all about rising to the challenge.
The event boasted an array of exhibition stands from companies and organisations across the industry, as well as many talks discussing challenging subjects. With thousands of insurance professionals in attendance, it was a great opportunity to network and learn from professionals and firms across the market.
REG’s CEO, Paul Tasker, commented on the value and significance of the event; “The BIBA conference served as a hub for industry professionals, allowing us to engage in meaningful conversations with potential customers, industry leaders, and experts. These interactions enable us to showcase our expertise, build trust, and position our company as a valuable player in the market.”
Last month, regulatory focus extended to crypto and AI sectors, the FCA partner with influencers to battle financial scams, REG automated German licensing data and cybercriminals scare the nation with new founded AI voice cloning scams...
Last month, heightened insurance premiums rocked society amidst cost-of-living crisis, a robot made history through performing surgery, the market prepares for SMCR reforms and an enhanced focus on D&I has materialised...
Last month, reinsurers' policy inflations began to destabilise the market, the treasury forecasts the introduction of the digital pound,and the FCA have urged financial services to commit to consumer duty, whilst calling out the whole insurance market to action allegiance to ESG commitments...
Last month, concerns around brokers' naivety of Consumer Duty were brought to light, a robot prepares to become a defence lawyer and OpenAI's ChatGPT has taken the internet by storm with its revolutionary imprint on the AI landscape...
Last month, the FCA revealed the next steps for FSCS , reports suggest there will be increases in cyber budgets and the the first UK space launch is granted its licenses...
Last month the FCA released the long awaited Personal Lines data, we saw updates on the Solvency II Reforms and the CII issued apologies after experiencing their latest cyber attack...
Last month, we saw a crackdown on money laundering and illegitimate business, experienced a move towards more advanced artificial intelligence, and prepared for growth within the cyber insurance market...
In September we saw the FCA seek to expand their scope of regulation, self-driving cars to be closer than we thought, and cyber attacks shaking the security landscape!...
Last month we finally confirmed the changes to the Appointed Representative regime, saw insurers reviewing policies in the wake of 'warlike' cyber attacks and understood why the Insurtech sector is suffering from an investor confidence dip...
In August we saw an eerie confession from a Google employee, one specific country set to dominate the metaverse economy and REG host a Networking Event all about young people in insurance...
In July we saw the theft of $100M worth of crypto, the FCA's heavy fine for a London market broker and WTW's new prediction tool...
Last month we discovered the importance of climate change in the insurance world, saw the FCA in 'deep crisis, AI's use in tackling wildfires and Allianz's guilty plea. Read these articles and many more, along with our usual updates from REG and the REG Tech sector....
This month we discover Aviva's AI partnership, insights on car insurance prices and the FCA's staff strike...
This month we look at the largest fine Lloyd's have filed in 336 years, warnings regarding Russian computer technology and REG welcomes three new employees...
This month we look at the increase in cyber-attacks and demand for cyber insurance. This edition also includes Gabriel Webber's thoughts as the race for ESG regulation begins...
This month we look at cloud-based technology and the £250 million deal for Freeway with Sabre...
This month we look at HSBC's fine for AML failings, and the effect of the FCA on motor insurance premiums...
This month we look at the urgent call for digitalisation in the insurance industry and developments in the Natwest anti money laundering case...
This month we look at the NatWest money laundering case, growing concerns for the Insurance industry and a "Ghost" broker jailed in Cambridge...
This month we look at FCA fines and the insurance market reaction to new money laundering regulation...
