After making three board appointments including former secretary of state, Nicky Morgan. FSCS’s board chairman, Marshall Bailey OBE discusses the firm’s rising levy, how these appointments will bolster its 2020 strategy and the new challenges it faces due to the pandemic
The Financial Services Compensation Scheme (FSCS) is hoping to decrease its insurance levy through its 2020 strategy.
It hopes to work with the insurance industry to point out the “bad actors” and “bad practices” to ensure that these activities are minimised.
On joining the firm as chair of the board in March 2018, Marshall Bailey introduced the fourth pillar called ‘prevent’ in the firm’s strategy.
Bailey urged brokers and insurers to remain vigilant and to work together to achieve these goals.
He told Insurance Times: “We [at the] FSCS do not have the power to prevent things, but what we do have is a tremendous knowledge and insight into the damage that gets done.
”In my opinion, we have got a responsibility to work with the industry and the regulator, along with consumers to forge a preventative structure that will decrease the levy.
“The levy is of course a direct result of bad outcomes, so therefore the implication goes right back to the consumer.”
This fourth pillar which Bailey created, he added, is so important “because the levy has been going the wrong way”.
To strengthen the execution of its strategy it has appointed three non-executive directors to its board last week.
These include Baroness Nicky Morgan – former secretary of state, Cathryn Riley – previously Aviva’s group chief operating officer and group chief information officer. As well as Wendy Williams – HM inspector of constabulary, and HM inspector of fire and rescue services, responsible for 13 police forces.
Morgan and Williams will join the board on 1 September 2020 while Riley will take helm on 1 February 2021.
The FSCS’s strategy was launched last year and its four pillars are:
- Prepare – FSCS must be able to protect consumers in a crisis or in the event of major failures to maintain public confidence and financial stability.
- Protect – FSCS is known and trusted for protection that puts people back on track through outstanding customer experience.
- Promote – the full range of FSCS protection is known about and trusted.
- Prevent – FSCS collaborates with our regulatory and industry stakeholders to help prevent future failure and to reduce compensation costs.
Decreasing the levy
Bailey explained that FSCS has been raising more funds from the industry based on a structure that is determined by Treasury, Parliament and the FCA.
The FSCS wants to decrease the detriment to the consumer. In May the FSCS confirmed its levy for 2020/2021 was set at £649m, £14m more than the figure forecast.
“We recognise that every pound raised from the industry is a pound taken away from the industry, but it is also a pound that represents some incredibly tough human stories.
“This fourth pillar and the boards desire to unify around this strategy, and the way that we have been able to attract some incredible people into the discussion in a way that allows effective challenge and all that good stuff, has now attracted good people like Morgan, Williams and Riley.”
Bailey said that these key appointments means that the FSCS is onto a “good thing” which is “working with its stakeholders including the insurance sector to do everything we can together to weed out the nonsense, to stop the practices that are causing the levy to go higher.
“And to work with the public in a financially stabilised confidence building way to get this into better shape than it is currently.”
Bailey holds a non-executive director position at the London Stock Exchange. Previously he has held positions as chairman of Chubb’s risk committee and independent non-executive director.
Constantly shifting
Bailey explained how the organisation had coped during the Covid-19 pandemic.
“We have operated absolutely seamlessly, we haven’t missed a day, we haven’t had any internal IT challenges, our customers receive the same kind of response times as before.
“But it’s also true that everyone is operating differently. With Covid-19 although there are some that continue to be paid by their employers, to work from home and therefore are only touched by this in certain ways.
”There are many people who have lost their incomes, lost their businesses, and are increasingly dependent on the things that we are trying to protect like their savings and pension pots.
“So, the Covid-19 environment makes the FSCS environment even more important. It needs to be something that we are sensitive to as that risk goes higher as the financial detriment increases through the difficult economic and financial situation that the [pandemic] brings.”
Overall, Bailey said that the FSCS 2020 strategy will continue, and the firm is determined to work on the three pillars, with regards to the ‘prevent’ pillar he added that preventing the wrong types of outcomes gives the firm motivation.
The new board members are united in their goal to reduce the detriment to society.
Meanwhile, Caroline Rainbird, FSCS’s chief executive, added: “The work we do at FSCS is extremely important, not only to people who hold their money with regulated financial services providers but also in contributing to the financial stability of the UK.
”Each of these three new impressive individuals expressed a distinct understanding and appreciation for what we’re trying to achieve. I am confident that they will make important contributions, building on the fantastic work of our existing board members, as we move forward into an uncertain future.
“I look forward to working with them and for the oversight, foresight and insight they will bring with them.”
Read more…Poor data hampering FSCS from tracing customers of collapsed unrated insurers
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