The deadline for contract certainty has passed. How confident are you of having the processes in place? Michelle Slayford suggests a strategy
Senior managers need to ensure that their firms have reached the 85% contract certainty target agreed with the regulator by the end of last year. The target has been an enormous challenge for the entire insurance industry, especially when considered in the context of the numerous changes which have been necessary to achieve it.
For firms to achieve contract certainty they have had to review the way in which they do business and implement radical changes to their working practices, some of which have been in place for hundreds of years. Many firms would agree it has been an exacting challenge.
To be really successful and ensure that contract certainty has been fully embedded a change in culture will be important. However, a change in culture does not just happen overnight and firms should have looked at a number of areas within their businesses which have either a direct or indirect impact on achieving contract certainty in varying degrees.
Confidence in information
With this in mind, senior managers should enure they are able to demonstrate the work they have undertaken to achieve contract certainty and why they are confident in their management information (MI), or best endeavours where the target is still slightly out of reach.
We do not believe that it will be enough for firms to provide MI or a report confirming that they have achieved or exceeded the 85% target. Senior managers will need to be able to demonstrate how the target was achieved and more importantly how they satisfy themselves that it has been achieved correctly.
We have put together our views in how to achieve contract certainty (see box) to assist you in considering if you have done enough to initiate the culture change and make sure contract certainty really is certain now and in the future.
Thinking about this now will help formulate your thinking and aid you in preparing how you can demonstrate that you have met your regulatory obligations.
Of course, as with everything, it should be proportionate and when answering these questions you need to bear in mind the size and complexity of your organisation.
A lot of work, yes, but many firms are beginning to appreciate the business advantages and deduction of risk that contract certainty can bring and are making the most of the work they are undertaking by capitalising on these.
As we stated earlier, in many firms a change of culture is required and this will take time but you need to show you have made a good start and established firm foundations so that the future is certain. IT
Michelle Slayford is executive adviser at KPMG