Nearly half of brokers unaware of Senior Management and Certification Regime (SMCR)

24 October 2019

Nearly half of brokers aren’t aware of the impending introduction of the Senior Management and Certification Regime (SMCR), according to new research by Ecclesiastical.

The SMCR is being extended to all insurance intermediaries and solo-regulated firms on 9 December 2019, a year after the rules came into effect for insurers. 
The legislation was introduced in the wake of the 2008 financial crash to encourage a culture of greater responsibility among senior staff and make sure firms and staff clearly understand and demonstrate where responsibility lies. It was introduced to the banking sector in 2013 and the legislation was amended in 2016 to extend the rules to all authorised firms. 
Less than two months ahead of its introduction, Ecclesiastical’s survey of 250 brokers found that just 56% of brokers were aware of the changes, with brokers working for a national brokerage significantly less aware (27%) of the changes than provincial brokers (64%). 
Just 4% of brokers said they knew everything they needed to do ahead of implementation, compared to a third who said they had no knowledge at all. 

As part of the research, firms were asked how they were progressing with some of the key changes required to comply with the legislation ahead of its implementation. 
  • Half of brokers said they were on track identifying Senior Management Function and Certification Function holders, with a further 12% saying they had made some progress. However 7% said they hadn’t started yet and almost a third (31%) said they didn’t know. 
  • Almost two in five (38%) said they were on track training Senior Management Function and Certification Function holders on new conduct rules, while 16% said they had made some progress. 12% said they hadn’t started yet, with 34% saying they didn't know. 
  • The same number of brokers (38%) said they were making good progress reviewing HR policies to ensure they fit with the new requirements, with 13% making some progress. However, 16% had not started this work yet, and 32% didn't know. 
Positive for the industry

Once the legislation was explained to them, an overwhelming majority of brokers agreed that senior individuals at their firms should be made directly accountable for their actions, with 84% of brokers responding positively. 
Most brokers (58%) also agreed that greater accountability would help to raise standards in their industry. 
Adrian Saunders, commercial director at Ecclesiastical Insurance, said: “Our research shows that unfortunately a large number of brokers aren’t aware of the SMCR and what they need to do to get ready. However, with six weeks to go until implementation there is still time for firms to identify roles, draw up responsibilities and start to provide training on new conduct rules.”
John Miller, from insurance compliance firm RWA, said: “The big message from us is that SMCR is not just another piece of compliance: it is statutory code of conduct with, thankfully, great detail on how to prepare for it and to operate to a good and reasonable standard within its standards. So, statements of responsibility are not about identifying people to fine but about creating a formal structure which helps firms operate in a manner which is least likely to lead to harm to the customer.”
Information on the SMCR and how it affects intermediaries and solo-regulated firms can be found on the FCA website.