Culture & Talent is key to responding to the PRA’s 2020 Priorities for Insurers

In response to the PRA 2020 Priorities, general insurers need to go beyond governance and control to address the fundamental challenge of the industry – culture and talent.

In addition to ’ensuring firms develop and maintain a culture where staff feel able to speak up and raise concerns’, creating a purpose-driven, resilient and engaging workplace is critical to the success of all other priorities and ultimately business performance.

Without considering the impact and approach to; creating psychological safety, attracting talent, enabling cross-functional collaboration, developing leaders and building diversity & inclusion, any investment in processes and controls will be futile.

PRA’s Culture, Leadership & Talent Observations

Culture, leadership and talent challenges are evident across all PRA priorities. Although only implicitly referred to across the first 3 priorities (Reserving Adequacy, Governance & Controls, Underwriting Conditions, and Exposure Management) it is worth noting:

• The PRA’s observation of ‘under-developed links between internal business and control functions’ highlights the need for insurers to encourage cross-functional collaboration at all levels and ensure lines of communication and engagement are open and active.
• The PRA’s reference to ‘actuarial judgements being challenged disproportionately’ emphasises the need for insurers to consider the culture and values embedded throughout the firm. They should manage conduct risk by not only articulating and measuring unintentional misconduct but also building awareness of ‘moments that matter’ in relation to conduct.
• The PRA’s expectation of firms to adapt ‘their underwriting strategies, risk appetites and business plans and….address material control weakness’ speaks to the need for insurers to go beyond conventional thinking and explore the new realities, strategy and capabilities required in the 4th Industrial Revolution, including the need to build diversity of thought into every day decision making.

Explicitly within the final priority (Culture & Support for Control Functions) it should be noted:

• The PRA’s Anna Sweeney’s speech on ‘Impactful Change’ focuses on ‘how to build and sustain a diverse workforce and inclusive working environment across the sector’ reinforcing the need for insurers to consider talent attraction, engagement and workplace practices.
• The PRA’s reflection on conduct within the London market, that ‘some firms have more work to do to improve aspects of corporate culture and individual behaviour’ not only highlights the need for insurers to have continued focus on culture and conduct but also to connect this with their obligations under SMCR.
• The PRA’s question on whether ‘firms are promoting a culture where staff feel able to speak up about poor practices or unidentified risks’ and their ask for firms to consider ‘as well as formal channels such as whistleblowing, what other internal mechanisms may be useful’ is a clear indication of the need for insurers to do more around creating psychological safety. This was also raised in the PRA announcement of special requirements regarding whistleblowing systems and controls at the Society of Lloyd’s on 23rd December.
• PRA’s reminder to Boards ‘that they have a collective responsibility to articulating and maintaining a culture of risk awareness and prudent management of risk’ prompts the need for Boards to reflect on the direction given around expectations on culture and conduct.

6 Culture, Leadership & Talent Considerations

In summary to fully respond to the PRA’s 2020 Priorities we urge firms to consider 6 key Culture & Talent focus areas:

1. Defining a culture, conduct & accountability framework and governance model
2. Attracting, developing and engaging talent to foster diversity of thought
3. Creating a culture of psychological safety to speak up and listen up
4. Developing leaders for the 4th Industrial Revolution
5. Encouraging cross functional collaboration & communication
6. Building a diverse workforce and inclusive culture

Wharton Business Consulting have proven capability in culture, leadership and talent transformation across Financial Services. With a team of over 35 exceptional ex-big 4 consultants and collaborators (including our research partner John Higgins, co-author of Speak-Up) we bring progressive insights and deep human capital expertise to help you address these culture and talent challenges.

We have built a strong reputation in Financial Services based on our flexible delivery model and thought provoking approach, most recently including: moderating the ‘Transforming Culture in Financial Services’ panel at City Week; running the ‘Your Voice’ session at the everywoman in Insurance forum; providing insight on the FCA CultureSprint expert panel; running a CISI Masterclass on Leadership in 4th Industrial Revolution; and winning the Business Culture Award for Leadership.

Immediate Next Steps

Insurers have already engaged us to: run sessions with the Board and ExCo to provoke thinking and conversations on culture & talent; conduct analysis on whether there are systemic issues around speaking up and inclusion.

For more information on how these sessions can ignite your thinking and get you started around planning and responding to these 2020 priorities, contact Natalie Wharton.