It is interesting that while the banking sector has placed considerable emphasis on trading partner onboarding, KYC and Customer Lifecycle Management (CLM) generally, Insurance has been slower to address this.
I understand there are less/different compliance requirements for money laundering, sanctions and other regulatory issues but the FCA has highlighted a weakness among many brokers operating models. They may have done due diligence when they first onboarded a carrier but how much effort goes into continuous monitoring of their status? How much continued KYC (know your carrier) activity do they do?
CLM and KYC is not a "one hit" effort. This is something that the banks have great experience of and requires ongoing effort. Good technology solutions make this effort considerably easier and transparent for the regulator too.
“We are planning to do further work to verify that insurance brokers are conducting appropriate due diligence on the insurers they use.” Those were the words of the Financial Conduct Authority (FCA) as it hammered home the importance of due diligence following the failures of several insurers, stressing the vital role played by insurance brokers. The FCA said these intermediaries should be able to demonstrate that they have carefully considered the providers that they place their customers’ business with. “Suitable due diligence is a key part of the process that we expect insurance brokers to perform on the insurance companies they use,” stated the regulator. “Our main concern is the risk to customers in the event the insurer fails and is unable to pay claims.