Gary Dixon explains why now is the time for insurers to make sure they have the right iNED sitting on the board
Demand for independent non-executive directors (iNEDs) will soar in the insurance sector in 2019, as the Financial Conduct Authority (FCA) looks to improve consumer protections by focusing its attentions on driving up corporate governance standards at board level.
As the City watchdog takes a closer look at governance structures, the opportunities for insurance executives are twofold.
PUT YOUR HOUSE IN ORDER
First, it is a timely reminder that insurers must put their own houses in order. They must ensure they have the right iNED sitting on the board, one that is adequately armed with the skills and experience necessary to act independently in the interests of all stakeholders.
This is particularly pertinent given the super-complaint filed with the Competition and Markets Authority by the Citizens Advice Bureau in September. The charity slammed the practice of overcharging loyal customers, warning again that consumers are being ripped off.
It is a wakeup call to insurance executives: is your iNED representing all stakeholder interests at a boardroom level? Are they demonstrably independent and could you evidence that should the FCA come calling?
Now is the time for a board effectiveness review to ensure that you are compliant from the top down. There must be an effort to ensure the board is balanced, and that there is a clear distinction of roles between the executive director and their independent counterpart, reflecting a commitment by the executive to listen to consumer interests and act on them.
Only by investing in professional standards can boardrooms ensure they have the right board-level skills, with at least one iNED helping to steer a culture that heads off any regulatory issues before they arise.
HOW TO BE AN EFFECTIVE INED
While insurers must be looking to drive up the standards of their own boards, there are growing opportunities for aspiring insurer iNEDs to take c-suite-level positions outside the sector.
In what could be a precursor for insurance markets, asset managers have been mandated to recruit two iNEDs to improve standards of governance within firms and ensure better scrutiny of their costs and charges.
It is expected that an additional 480 iNEDs will be needed to fill vacant positions. As this is a sector that has traditionally recruited from within and with the onus now on 'independence', insurance executives are well positioned to be in the hiring line.
Insurance is bursting with experienced people who have the potential to fill the available positions.
If you aspire to hold an iNED role, take the time to carefully assess your own skillset and source the right training in areas where you feel you could be lacking.
While your insurance role will put you in good stead, it might be worthwhile looking to build experience of the iNED position by taking up a voluntary boardroom role in another sector, such as health or education.
"Insurers must be seen to be embracing independence to address concerns over consumer interests"
Insurers must be seen to be embracing independence to address concerns over consumer interests. By investing in the iNED position, insurers will not only drive up professional standards across the sector but also address any weakness in their own corporate governance structures.
Make no mistake, the FCA will act if the markets do not. Prevention is better than cure.
Gary Dixon is chair of the Association of Independent Non-Executive Directors