Taking stock - What have we learnt so far?

Certainly, in business many harsh known truths have needed to be faced head on, with the consequence of uncomfortable accelerated change taking place. Over the last few weeks all firms have been forced to take a long hard look at how they operate, listening and understanding their customers along the way. Many will never go back to the way it was. 

 

I couldn’t possibly say where we’ll all end up, but there are a number of things that have come into sharp focus and may provide a glimpse of the future. 

There’s a regulatory requirement to have a sustainable business model. When lockdown seemed an inevitability, many (not all), firms enacted their Business Continuity Plan (BCP). Realistically no one thought that a worldwide pandemic would be the catalyst, but having a broad plan helped them manage the situation in a structured manner. 

 

A BCP articulates what to do when the worst happens. It provides the necessary level of detail and direction when time is short and the pressure is on. We’re all customers, and there’s plenty of great examples of firms carrying on as usual, or with minimal disruption as far as the outside world is concerned, yet we know that beneath the surface a huge effort is taking place to provide a service.

 

In the insurance sector we all work to manage risk. Why then, do some brokers ignore their own advice and see vital tools such as the BCP as merely another regulatory box to tick? When is the worst time to discover that your BCP isn’t up to scratch? When there’s a crisis!

 

Assuming that your staff have the capability to work from home isn’t good planning. Not everyone has fast broadband, some may not have access to a computer, and what if you need to buy a supply of laptops only to find out that everyone else has the same idea? How are you going to communicate both internally and externally when it can’t be done face to face? Which video conferencing facility is your preference? Cybercrime continues to increase, are you sure that those working from home and accessing your systems are as diligent as when in the office? How will you manage people remotely if you’ve never had to do it in the past? The list goes on. As the saying goes, you don’t plan to fail but you can fail to plan.

In a similar vein to a Business Continuity Plan, you need to have a long term plan for the business when its ownership changes. The FCA expect firms to have thought about this and formulated a written plan.

 

For some, the changes brought about recently will push them to think more actively about their future. Those firms that have specialised in hard hit sectors may find that previous succession plans need to be re-assessed or even torn up and started again. Exit strategies that may have meant the owners could cash in sometime in the next couple of years may not be viable as funding becomes difficult and buyers wait for sunnier times. The opposite may also happen. Owners decide that now is the time to move on and seek the dwindling pool of buyers. What then happens to the so-called market price for a broker? No doubt it’ll be simple supply and demand economics.

 

It’s entirely possible that after an acquisition drought the floodgates will open, and consolidation will really pick up the pace. The question is, when? If firms are not sufficiently capitalised and end up running on financial fumes, we may see the demise of some. It’s understandable that the FCA are watching closely, they’re looking out for the end consumer.

Furlough, redundancies, mental health, working from home, remote management are all significant issues for firms to deal with right now and well into the foreseeable future.

 

I wonder how many firms are trying to find a way through this minefield without any form of professional support. Employment law is complex and sometimes doesn’t sit in total alignment with regulatory requirements. Are we sitting on an employee legal dispute time bomb?

 

Most of us have transitioned to working from home very well and where it suits, it may, in time, become a more permanent way of working. Changing the operating model from everyone in the office to a flexible arrangement isn’t simply a case of writing a homeworking policy and moving on, it’s way more complex.

       

If staff are furloughed, how will they feel about getting back to work? For those who carried on working, has their workload increased? How’s that affecting them? 

 

We’ve seen examples of firms enquiring whether they can make people redundant using coronavirus as the backdrop. Generally, this points to at best, a poor or non-existent performance management process, at worst, the darker side of a firm’s culture. Either way, as a regulated entity the FCA would not find this acceptable. Redundancies happen, it’s a fact of life, but remember that the manner in which a person exits your business will stick with them for a long time. Disgruntled people tell an average of 10 of their friends or family. Reputations take years to build and minutes to ruin.

Uncertainty and financial pressures mean that more and more customers could be described as vulnerable. What’s a vulnerable customer? A typical explanation would be that a customer has an impaired capacity to make an informed and reasoned decision.

 

Every insurance broker needs to be aware of vulnerable customers and how to identify them. Whilst this is more prevalent for those brokers dealing in personal lines, it’s entirely feasible that every firm will encounter vulnerable customers at some point.

 

With the economy in a state of freefall and many businesses struggling to just keep going, it’s clear that brokers need to be more alert than ever to the prospect of their clients decision making.

 

The FCA are keeping a close eye on how regulated firms are responding and expect the right actions to be in evidence. Irrespective of the regulatory requirement, under the heading of Treating Customers Fairly, this is good business practice.