Culture will be front and centre of the regulatory agenda in Australia in 2016. The absence of the right culture in an insurer will be a red flag for regulators, so businesses need to increasingly consider what drives the behaviour of individuals and actions of senior management in their organisation.
Both the Australian Securities and Investments Commission (ASIC) and the Australian Prudential and Regulatory Authority (APRA) are increasing their scrutiny of the culture in regulated businesses. Under its Corporate Plan for 2015-2019, ASIC notes that where a firm's culture is lacking this will be a "red flag" that there may be broader regulatory problems. ASIC has defined culture as the underlying mind-set and influences on the behaviour of individuals within an organisation and actions of senior management that are put in place, including incentives. Equally, APRA will undertake a stock take of practices that Boards are employing to assess whether a firm's risk culture supports the ability of the firm to operate consistently within its risk appetite.
Going forward, regulated insurance businesses will need to ensure that it they are responding to this greater scrutiny. Regulated entities will need to focus on creating a customer-centric culture that prioritises the long-term best interests of investors and financial consumers.