ICQ Log - Talking Points:

From Today’s Fragile to Tomorrow’s Agile World


Last Updated: 01 June 2021

In this article, Elif Gurbuzer Mooney, who was awarded second place in the ACOI Niall Gallagher Professional Diploma in Compliance Scholarship competition, explores the traditional role of the compliance professional, how the role has evolved during the COVID-19 pandemic and what might be the long-term effects this has on the compliance professional in the future.

Compliance is neither a new concept to society nor to the insurance sector. In fact, it first emerged in the 19th century and grew further during the 20th century as tension increased between regulators and businesses through various scandals (Lawshelf, 2020). These kinds of scandals, which had a direct impact on consumers and the society as whole, evolved the purpose and role of compliance as companies began to address these scandals by analysing the factors that caused them. Since then, the world and the insurance sector have become more connected, co-dependent and transparent. This retrospectively shaped the insurers relationship with its customers and regulators in which insurers have a responsibility to be transparent, honest, fair, professional and seek the best interest of the consumers. Taking these changes under consideration, this paper will address the changing role of the Compliance Officer by looking at its evolving role in light of COVID-19. For this purpose, it will first look at how consumers and insurers have been impacted by COVID-19. The paper will than look at the regulatory response to understand how this evolved the role of the Compliance Officers to become more proactive and agile. For this purpose, it will focus on conduct risk as a practical example to understand the changing role of the Compliance Officer. Finally, it will question how the role of a Compliance Officer may evolve post-COVID-19 and what opportunities may lie ahead.

COVID-19 from a Consumer Perspective

The definition of consumer within financial services derives from the Consumer Protection Code 2012, which covers both individual consumers and incorporated bodies with a turnover of less than €3 million (Central Bank of Ireland, 2012). Naturally, the impact of COVID-19 has been different for individual consumers in comparison to incorporated bodies.

Many individual consumers experienced the impact of COVID-19 through financial distress due to loss of earnings. This as a result impacted consumer’s desire to reduce their spending on insurance policies. For example, according to a recent research paper (Deloitte, 2020), due to the economic distress and the restrictions imposed by lock down, consumers are deferring renewing their insurance policy, or even getting a new insurance policy and, in many occasions, are seeking to reduce their coverage. A good example of this can be seen in the reduction of policies purchased for comprehensive motor covers which are replaced by Third Party Fire and Theft cover that has a lower premium payment. The same research papers also indicate that there is an increase in cancellation of policies due to payment default.

The incorporated bodies also demonstrate similar patterns. Due to the economic and social turmoil, there is significantly less business activity, evident from the increase in cancellation of policies, and the number of payment rebates (PwC, 2020). However, the impact of lock down is observed in more variety in business consumer than it is in personal consumers. Similar to Ireland’s current GWP growth trends (CBI, 2020), even though some businesses such as restaurants and pubs have been adversely impacted by the lock down, certain businesses such as pharmaceuticals and technological firms have utilised the opportunities within the current environment. This assisted business insurance to remain relatively stable (Deloitte, 2020).

COVID-19 from a Consumer Perspective COVID-19 and its Sectoral Impact

COVID-19 highlighted the challenges that the insurance industry faces in various aspects like “policy coverage limitations, falling asset values affecting capital, changes to customer attitudes, and difficulties recruiting and retaining talent” (PwC, 2020) The strong pre- COVID-19 economy and the strict solvency requirements imposed by the Solvency II Directive and Central Bank of Ireland, had enabled Insurers to enter into the pandemic with strong liquidity and capital. However, the reduction of new business and the economic slow-down will have a material impact on the insurer’s financial performance, growth, profitability and their capital. Furthermore, the low interest rates and low yield curve observed in Europe combined with a highly volatile financial market and corporate bonds have impacted insurer’s investment returns which is a fundamental part of its liquidity (Deloitte, 2020). With increases in claims, potential of a severe recession, low interest rates and a volatile market, Insurers may find themselves in distress and in need of more capital and liquidity (OECD, 2020).

What has been the Role of Compliance Officer during COVID-19?

To understand the role that a Compliance Officer played during the pandemic, one must first look at the regulatory response to COVID 19, as they are directly linked. The Irish government announced a lock down in March 2020. Following this, CBI published ‘Dear CEO letter’ setting out its expectation from Insurers (CBI, 2020). This letter has been backed up by Deputy of CBI and, has been critical to the industry as it meant a shift from focusing on top line growth to consumer protection during a crisis. To this extent, the Compliance Officer role has become more important than ever with this letter. Pre-pandemic, the Compliance Officer was mostly responsible for the ongoing monitoring of the insurer’s activities with the regulations and rules which is a cyclical process with little unknowns. Since COVID-19, the reactive role of the Compliance Officer became more proactive as both regulatory requirements and the need for a consumer protection focus intensified. CBI is actively engaging with each insurer to understand the operational and financial impact of COVID-19 through regular communication. This is evident from CBI’s increased regulatory interactions with the PCFs to ensure appropriate governance and controls are in place to support a customer centric decision-making process with the right culture and behaviour. There is also an increasing emphasis on the Board of Directors involvement with key decisions to ensure short and long-term impacts of COVID-19 is understood and addressed.

 All these combined, re-emphasized the role of the Compliance Officer not only as a reactive function waiting for the final result but, as a proactive function that provides advice on day to day decision making of the company on critical COVID-19 related topics. It also demonstrated that a strong and agile compliance function is not one that follows the business, but it is one that works side by side with the business.  

The Agile Response to COVID-19 COVID-19 demonstrated the need to have a strong compliance presence, but it did not change what compliance used to do on a regular basis, it only added further requirements. Once the height of the pandemic is over, there is a risk that the focus on compliance may diminish. So, what must a Compliance Officer do to keep this engagement? It is simple in theory, but complex to implement in practice; be agile.

Traditionally, agile has four key values: 1) interaction, 2) working product, 3) collaboration and 4) response (Agile Manifesto, 2020). Agility in this paper refers to a proactive and continuous engagement with the business to address issues at an early stage and to have a systematic mechanism to respond to these issues rather than reacting after they emerge. This paper believes agile values are transferrable to a compliance function’s processes and workstreams. For instance, let’s look at lack of appropriate governance to understand how agile value could be applied in conduct risk management.

Without appropriate governance mechanisms, one cannot effectively identify and mitigate harm caused by the business activities. Having a matrix of committees does not necessary guarantee good governance, if the same or similar MI is presented without understanding the root causes or actions needed to be taken. In this context, conduct risk MI is a key control for effective governance and if it is not designed properly and transparently, the insurer may not be able to identify a conduct risk caused by its activities.

An agile methodology can be beneficial for building an effective conduct risk MI. If we were to consider COVID-19 as a trigger event, an agile Compliance Officer should respond to this event by ensuring its working product, in this case the Conduct Risk MI, is responsive to the changes in the customers behaviours, products and distribution channels. In order to have a responsive MI, the Compliance Officer needs to understand the changing nature of the conduct risk within the business. For example, COVID-19 might have changed the proportion of the vulnerable customers who were not initially considered vulnerable pre-pandemic. Alternatively, the current economic environment might put pressure on sales teams to sell more policies and utilize different pricing strategies to meet their targets.

This is where interaction becomes a key element. An agile Compliance Officer should interact with underwriters and sales team at an early stage to assess the number of products sold and understand if it still meets the needs of the agreed target market. Findings from these reviews, such as discrepancy in the pricing or target market, can be a valuable indicator to monitor for conduct risk MI. Agile is a cyclical process rather than a process with a start to end. Therefore, the initial interaction should be supported by ongoing engagement to ensure changes in the business practices and consumer behaviours are continuously captured and monitored in the MI.

There are many more drivers of conduct risk including, but not limited to what is listed in this paper such as lack of consumer-focused culture, inappropriate remuneration practices, product design and complexity and so on. An agile approach can be applied in each case to ensure any potential risks in the product life cycle is identified before they actualise and to provide an opportunity to develop appropriate mitigation plans.

Even though agile is a new concept to compliance, what it aims to achieve is not. It is a different approach to what many Compliance Officers have already been working towards: proactively work with the business by providing assistant and expert advice to protect the company and ensure fair outcome for the customer.

COVID-19 put these assurance processes to the test for many Insurers. Insurers who had a strong compliance presence with the right challenge mechanism have demonstrated their robustness, while others learnt the importance of having a proactive and engaged compliance function from this crisis.

COVID-19: A Crisis or an Opportunity?

At the height of the pandemic, as Ireland is seeing the highest case numbers with a potential recession knocking on the door, there is an opportunity for Compliance Officers to emerge stronger from this crisis. COVID-19 showed how fast the world can change overnight and Compliance Officers regardless of which financial sector they work in, had to react and adopt to this crisis quickly. During this process, we learnt to be more resilient, responsive and agile. It is now time to put what we learnt from this experience into practice. Like all crisis, COVID-19 will be over one day, and when we get out of the tunnel and into the light, where will the Compliance Officer be standing; beside the business or behind it? How we act today will determine the answer.   

Lawyer Photo

Author: Elif Gurbuzer Mooney

Second place in the ACOI Niall Gallagher Professional Diploma in Compliance Scholarship competition


  1. Agile Manifesto 2020, “Manifesto for Agile” Agile Manifesto, viewed 16 October 2020. https://agilemanifesto.org/ Bovill 2020, “Covid-19 and conduct risk: Are you taking reasonable steps?” viewed on 20 October 2020. https://www.bovill.com/ covid-19-and-conduct-risk-areyou- taking-reasonable-steps/
  2. Central Bank of Ireland, 2012 “Consumer Protection Code” Central Bank of Ireland, viewed 12 October 2020. https://www. centralbank.ie/docs/default-source/ regulation/consumer-protection/ other-codes-of-conduct/4-gns-4- 2-7-cp-code-2012.pdf?sfvrsn=6  
  3. Central Bank of Ireland, 2020 “October Quarterly Bulletin” Central Bank of Ireland, viewed 15 October 2020. https://www.centralbank.ie/ publication/quarterly-bulletins
  4. Central Bank of Ireland, 2020 “Dear CEO Letter, March” Central Bank of Ireland, viewed on 15 October 2020. https://www. centralbank.ie/docs/default-source/ regulation/consumer-protection/ dear-ceo-letter---central-bankof- ireland-expectations-ofinsurance- undertakings-in-lightof- covid-19.pdf?sfvrsn=20
  5. Central Bank of Ireland, 2020 “Dear CEO Letter, January” Central Bank of Ireland, viewed on 15 October 2020. https://www. centralbank.ie/docs/default-source/ regulation/industry-market-sectors/ securities-markets/wholesalemarkets/ securities-market-conductrisk--- dear-ceo-letter.pdf?sfvrsn=5
  6. Central Bank of Ireland, 2020 “Customer Protection Outlook” Central Bank of Ireland, viewed on 17 October 2020. https://www. centralbank.ie/regulation/consumerprotection/ consumer-protectionoutlook- report#:~:text=The%20 Central%20Bank’s%20 Consumer%20Protection,do%20 to%20minimise%20these%20risks.
  7. Deloitte, 2020 “Impact of COVID-19 on Insurance Industry” Deloitte, viewed 15 October 2020. https://www2.deloitte.com/ie/en/ pages/covid-19/articles/impact- COVID-19-insurance-industry.html
  8. Deloitte, 2020 “Enhanced Market Conduct Risk during COVID-19” Deloitte, viewed 20 October 2020. https://www2.deloitte. com/content/dam/Deloitte/uk/ Documents/financial-services/ deloitte-uk-market-conductrisks- during-covid19.pdf
  9. EIOPA, 2019 “Framework for Assessing Conduct Risk Through the Product Life Cycle”, EIOPA, viewed 20 October 2020. https:// register.eiopa.europa.eu/ Publications/Reports/2018.6644_ EN_03_MOD-GP.pdf
  10. Hsien Heah, Wan, 2020 “ COVID-19- 7 Steps to Treating Customers Fairly” Barneet Waddingham, viewed 21 October 2020. https://www.barnettwaddingham. co.uk/commentinsight/ blog/covid-19-treatinginsurance- customers-fairly/
  11. Lawshelf 2020, “History of Corporate Compliance Regulations”, Lawshelf, viewed 12 October 2020. https://lawshelf.com/ shortvideoscontentview/history-ofcorporate- compliance-regulations/
  12. OECD 2020 “ Insurance Sector Response to COVID-19 by Governments, Supervisors and Industry” OECD, viewed 13 October 2020. http://www.oecd.org/pensions/ Insurance-sector-responsesto- COVID-19-by-governmentssupervisors- and-industry.pdf
  13. PwC, 2020 “How does the insurance industry respond to the coronavirus crisis?” PwC, viewed 15 October 2020. https:// www.pwc.ie/issues/covid-19/ insurance-industry.html
  14. Vincet, Nicole 2017 “Conduct Risk- a UK perspective” Deliotte, viewed on 20 October 2020. https://www2.deloitte.com/ content/dam/Deloitte/ie/ Documents/Risk/ie-Nicola-Vincent- Breakfast-briefing-slides.pdf 

ICQ Summer Edition 2021

This article was taken from the ACOI's ICQ Summer Edition 2021