Conduct Risk Reporting for Leading Lloyds Insurer

In 2016, a leading Lloyds Insurer client of IDS launched a company-wide Client Experience Program, which articulated and set in motion a pro-active approach to the required governance, culture and capabilities to embed conduct risk within their risk management framework. 

They sought after IDS to cleanse and collate the data from multiple systems, and implement a robust management reporting solution to identify, measure and control risks of regulatory concern.  IDS produces comprehensive M.I. on customer outcomes on a monthly and quarterly basis and the regulatory submission packs have increased the insurer's ratings within Lloyds and the FCA. 

Senior managers have found that the MI empowers them with a clearer view on client experiences allowing them to not only build trust in the fact that customers are being treated fairly but also drive action and change to bring commercial benefits.  

Client Business Issue 
 

As with many insurance firms our client operates on numerous disparate legacy systems across business lines, which makes pulling together Conduct Risk MI particularly challenging with different formats and varying levels of data quality. Prior to IDS involvement sourcing, cleansing and collating the data was very much a manual and time-consuming exercise.  The Conduct Risk MI Reports needed to bring together data from a CRM system, BDX binder management system, and four underwriting systems as well as Complaints and Claims Declinatures databases.  The combined data needed to answer a series of questions for example are:

• products being designed in line with client’s needs and expectations
• products being sold to the correct clients (selling to clients the product has been designed for)
• products providing value for money
• good customer services provided with the products
• customers being treated fairly

 The results needed to support the client in measuring customer outcomes in a timely and comprehensive manner to ensure controls were effective.   

Client Value Received

The original MI pack was then further tailored to its needs and risk profile. Using Lloyd Conduct Risk Reporting standards IDS worked with the client to determine the metrics and KPI's required to monitor Customers, Products, Sales & Distribution, Complaints, Claims and Servicing, including comparisons of actual performance against tolerances/risk profiles.  

IDS built an automated solution to report, cleanse and aggregate a complete set of data from the various systems and sources.  For example key indicators covering product uptake by segment, market propositions, conduct behaviour, complaints, policy retention rates, claims numbers over a period, declinatures and many more variations were included with outliers highlighted.  Triggers and thresholds on minimum and maximum tolerances were built-in to give early alerts identifying where increased risk exists and where customer outcomes are less than satisfactory based on the class of business and risk appetite. For example, high cancellation rates and lapse rates could indicate the products are not meeting the client needs and expectations.  IDS were able to provide trend analysis where the insurer held historical data.

To ensure the MI was accurate and consistent IDS reconciled the data with the Insurers Stats. Department for quality assurance. 

Benefits

Our team who prepares and collates the Conduct Risk MI have a balanced set of data and analytical skills in addition to operational knowledge of front to back-end insurance processes combined with deep insurance business and sector knowledge, identifying risks that can often be obscured in large data volumes.

The process by which data is sourced and means in which information is gathered and aggregated is now as streamlined as possible to improve accuracy, consistency and timeliness and ensures there is a clear audit trail. 

The MI has been a catalyst for driving change and this is a clear indicator of the effectiveness of the framework and demonstrates the Insurers pro-active culture of managing their conduct risks generally.

IDS ensure the right level of information is provided to the different governance levels;

1. On a monthly basis to Underwriting Managers for each business unit who have been able to shift focus from managing the collation of the MI to proactively analysing the data and acting upon the measured KPI's indicators and tolerances which answer a series of questions. The full extent of conduct MI data at a granular level allows them to see outliers easily. Enabling more forward-looking conduct risk MI.  Allowing frontline staff to proactively determine whether these highlight instances of customer detriment and identify root causes so they can make good decisions and take appropriate action for customer interests. 
2. Senior managers at Board level engage on a quarterly basis through a board pack power point presentation. This summarises and interprets the data and key metrics alongside a commentary which gives details of conclusions and actions planned to resolve exceptions outside risk appetites linked to overall objectives. 

Examples of where problems have been identified early and remedial action taken to mitigate conduct risks include:

Example 1 

A supplementary report is produced on Bordereaux

Steps were taken to gain all of the necessary data from coverholders and ensure it was as adequate to compile the conduct MI.  In one case, this required IT development for a valued coverholder with extensive HPR and the insurer contributed towards the IT changes using IDS resource to enable the coverholder to provide the data in the correct format both conduct risk and Solvency II. (see case study).

Example 2

Following the UK storms of winter 2016, the MI Pack was supplemented with a commentary for its Board on its approach to ensuring customers received fair outcomes. 

Example 3

Policy Wordings

Example 4

Claims decisions -

Example 5

Led to a product review

Example 6 

Complaints - Manchester  

The above shows a key test of the success of the Mi framework and packs.  Feedback from Lloyds was very positive, they said it was one of the best they had seen in the market.