Conduct of Business Risk - (COB)

....in the United States, the term “market conduct” instead of “conduct of business” is more widely used.

2015 0501 - AAA to IAIS - Committee Comments To IAIS On Conduct Of Business Risk Draft Paper

Sources of conduct of business risks

  • conduct of business risk can arise from multiple sources, including factors inherent to insurance markets, the insurer’s or intermediary’s governance and business processes, and broader economic and environmental factors
  • conduct of business risk includes risks arising from poor business conduct to which insurers, intermediaries and the insurance sector itself are exposed, but importantly also risks to which insurers and intermediaries expose their customers.

2015 0617 DRAFT - IAIS - Issues_Paper_on_Conduct_of_Business_Risk_and_its_Management - 45p

  • ICP 19 Conduct of Business

    The supervisor requires that insurers and intermediaries, in their conduct of insurance business, treat customers fairly, both before a contract is entered into and through to the point at which all obligations under a contract have been satisfied.

  • While the dramatic changes envisaged in the scenarios presented to us might generate immediate and drastic response by a firm in another industry, in the life insurance industry the response -- if any -- comes at a more measured pace.
  • The crisis reaches its peak before the industry begins to respond effectively to the problem.
  • By the time response is forthcoming, the crisis is past and another issue begins to pick up steam to take its place. The
    financial momentum of the business enables companies to sail by the crisis peak, if I may mix a metaphor, and on into other troubled waters.
  • The slower, more deliberate reaction of the life industry enables the necessary changes to be made over longer periods of time, thereby gradually improving performance.
  • So far, this general avenue of conduct has been successful.
  • Will it continue to be so in the 1980's?

-- John R. Gardner

1980 - THE FUTURE OF PERMANENT LIFE INSURANCE, Society of Actuaries

Selected reference to international standards or material on COB supervision:

• AMF, Quebec: Sound Commercial Practices Guideline (June 2013)
• EIOPA: Guidelines on Complaints Handling by Insurance Undertakings (June 2012)
• EIOPA: Report on Best Practices by Insurance Undertakings in handling complaints (June 2012)
• EIOPA: Report on Good Practices on Comparison Websites (January 2014) FCA, UK: Journey to the FCA (October 2010)
• FCA, UK: Applying behavioural economics at the Financial Conduct Authority (April 2013)
• FSA, UK: Mystery Shopping Guide (November 2006)
• FSA, South Africa: Implementing a twin peaks model of financial regulation in South Africa (February 2013)
NAIC: Market Regulation Handbook (2013)
• OECD: G20 High-level Principles on Financial Consumer Protection (October 2011)

2014/10 - IAIS - Application_Paper_on_Approaches_to_Conduct_of_Business_Supervision 59p