FCA battling ‘snitches get stitches’ mindset when it comes to non-financial misconduct

On 15 November 2023, during the Sexism in the City inquiry, members of parliament queried representatives of the insurance industry on an alleged “culture” of an “old boys’ network” that persists within the industry.

Speaking to the representatives, Angela Eagle, member of parliament for Wallasey, said: “We can sit here and say, ‘oh, it is a terrible culture,’ but what are we going to do about it?”

Well, what is the sector going to do?

In one recent high-profile case of action last year (29 November 2023), it was announced  that CFC group chief executive David Walsh and CFC Underwriting chief executive Graeme Newman would depart the business following a Lloyd’s investigation into non-financial misconduct at the company. 

In the wake of the announcement, CFC said it acknowledged that there had been failings and was “taking a number of steps to strengthen its policies and procedures and further invest in its culture and people”.

However, before industry-wide enforcement action to amend cultural issues, it would be sensible to have an accurate picture of the problem – and the FCA has made moves to ensure that it knows exactly what is going on in terms of non-financial misconduct. 

During the second session of the Sexism in the City inquiry (17 January 2024), FCA executive director Sarah Pritchard confirmed that it would be intensifying its efforts to tackle non-financial misconduct across the City.

And the following month (6 February 2024), the FCA sent a letter to all regulated Lloyd’s managing agents, London market insurers and intermediaries informing them that they had until 5 March 2024 to provide information on their frameworks for the identification and reporting of non-financial misconduct issues.

“The information collected will enable us to build a clearer understanding of when and where non-financial misconduct occurs, provide us with a baseline assessment of each sector, and inform our ongoing supervisory work programmes,” explained the FCA’s letter.

With the deadline now passed, the FCA has said it would reveal the results of its information gathering later this year.

Industry’s problem

The insurance industry’s problem with “culture” is one that many will be well aware of.

For example, Sam White, chief executive officer and founder of Stella Insurance, explained that numerous women in the industry regularly share their experiences of “unchecked sexual” harassment and bullying with her.

She noted one recent incident that involved a senior woman whose boss attempted to force his way into her hotel after a night out. The boss involved in the incident later disparaged her for refusing his advances – labelling her a “whore” in front of colleagues.

However, despite reporting the incident to human resources, no action was taken.

“This is just one of many stories I could refer to [and] bad behaviour is not limited to one gender,” said White.

”Men can be victims just in the same way that women can be. I’ve called out behaviour where women have been just as inappropriate.”

During the Sexism in the City inquiry, ABI director Yvonne Braun represented the insurance industry. During questioning, Eagle noted that those presenting to the inquiry did “not want to say anything horrible” about their “organisation or members”.

However, she stressed that “the people that are on the receiving end of [misconduct] do not stay [in the insurance sector], because they cannot operate in a place where there is ongoing sexual harassment at a low level – and sometimes even worse.”

A month after the first session (13 December 2023), Aviva chief executive Amanda Blanc also gave evidence to the inquiry, sharing “appalling” accounts of harassment across the City – including unwanted sexual advances and being followed into hotel rooms.

When it comes to sexual harassment in the workplace, the Office for National Statistics’ (ONS) Experience of harassment in England and Wales report, published last year (7 December 2023), revealed that a quarter of those surveyed – both men and women – had experienced sexual harassment at their place of work.

The information was based from a six-month data collection period spanning from October 2022 to March 2023 and was gathered through face-to-face interviews with a total of 31,183 individuals aged 16 years and older.

FCA’s efforts

In an effort to foster positive change in the financial services sector, on 25 September 2023, the FCA issued a consultation paper entitled Diversity and inclusion in the financial sector – working together to drive change.

The paper outlined rules and guidance intended to promote diversity and inclusion across the industry, specifically addressing the issue of non-financial misconduct, such as bullying, sexual harassment, discrimination and other similar acts in the workplace.

However, White noted that firms should not expect the regulator to outline what constitutes non-financial misconduct. 

She explained: “There is not a grey area when it comes to non-financial misconduct and the challenge here is that the small number of perpetrators hide behind the idea that it’s confusing.”

Another challenge, White noted, was that it was “difficult” for the regulator to stamp out the issue when there is a “snitches get stitches” mentality with regards to non-financial misconduct.

She said: “It is school playground mentality. The snitches get stitches mentality does not disappear as people get older.

“The challenge is that the world has changed and evolved. Behaviours that were previously considered acceptable are no longer acceptable.

“But, if there are senior individuals that behave [in an inappropriate way], then there is a fear of calling out people, [because] they have a lot of power in the situation.”

Shaun Hurst, principal regulatory advisor at Smarsh, echoed White’s sentiments: “The [FCA] directive serves as a wake-up call for the industry to foster a culture where all forms of misconduct are recognised as detrimental to both the workforce and the institution’s integrity and reputation.

“In response, the insurance industry must now prioritise the integration of comprehensive strategies to address non-financial misconduct.

”Embracing this challenge can lead to a significant transformation in the sector, where a focus on creating and maintaining a positive workplace culture becomes as important as financial integrity – ultimately benefiting employees, customers and the broader community.”