At the end of February 2016, DNB emphasised that corruption through conflicts of interest and bribery continues to be underestimated by insurers. This is based on its thematic investigation into corruption in the Dutch insurance sector. It has, amongst other things, become clear that almost all insurers fail to identify third party risks. For example reputational risk for insurers as a result of their connection with relevant third parties such as tied agents and consultants. DNB expects insurers to be able to identify this corruption risk and take suitable measures in order to control this risk. However, according to DNB, third party due diligence is still not a standard practice in the insurance sector.
The investigation also revealed that large insurers, in general, inadequately monitor conflict of interest risks connected to the personal networks of their directors. According to DNB, there is a risk that directors through their additional functions and in particular because of their individual financial interests end up or appear to end up in situations whereby their individual interests prevail over that of the insurer.
DNB has published measures in the Good Practices Document that insurers could take to control their integrity risks:
- Creating the right tone from the top. Senior management should invariably emphasise the importance of compliance and integrity, and corruption in particular.
- When engaging new employees (particularly for positions with a higher risk of corruption), attention should be paid to personality characteristics affecting corrupt behaviour. The brochure mentions the following examples: narcissism, self-confidence, independence and emotional instability ‘combined with the social circumstances of employees’.
- Screening employees (periodically) with regard to any criminal and financial antecedents, where it concerns employees who are in a position to affect the bank’s sound conduct of business.
- Giving training with regard to integrity, fighting corruption, conflict of interest and related topics.
- Establishment of a whistleblowing policy and an incident reporting scheme.
- Investigation (due diligence) of the background, activities and reputation of third parties before engaging them.
In the Good Practices Document DNB has supplemented the above measures with some additional good practices. DNB attaches significant value to internal communication about integrity and the insurer’s anti-corruption policies. It is for instance recommended that firms communicate the right tone from the top to all employees via newsletters and awareness e-mails. Furthermore, DNB notes that it should be clear for all employees what the sanctions are for corrupt behaviour.
DNB attributes an important role to senior management. The tone at the top referred to above is an example of this, but also the recommendation to let senior management play an active role in anti-corruption training and the subsequent discussions. It is proposed to let senior management also sign the code of conduct, in addition to all other employees.
Several good practices relate to (the hiring of) new employees. For instance, it is proposed to establish a separate job application panel focussing on the suitability of the applicant from an integrity perspective. DNB suggests further that extra background checks should be performed on applicants for integrity-sensitive jobs. In addition, it is recommended to give anti-corruption training to new employees shortly after commencement of their employment. These training sessions should be repeated periodically.
With regard to reporting corruption, DNB makes clear that it should be clear throughout the entire organisation who is responsible for the implementation of the anti-corruption policy and that integrity incidents should be recorded (including near misses). In periodic compliance reports attention should be paid to the anti-corruption theme. These reports should also be provided to the supervisory board or the audit committee (if in place).
In relation to third party risk, DNB states that all payments to third parties should be approved by two persons and that these payments should be reviewed and assessed whether they are in accordance with market conditions.