Bribery and corruption are becoming more of a reputational threat and not reducing in regularity or severity, according to a report by risk management company Kroll.
The survey, whose respondents were largely, but not exclusively, from the insurance industry, were expecting bribery and corruption to either increase (35%) or flat line (57%) in 2017 compared with last year.
Practically half of those surveyed (49%) said they didn’t have enough resources in their anti-corruption efforts.
The most commonly blamed cause of corruption (40%) was third party vendors contracted by companies.
Robert Huff, Managing Director in Kroll’s Compliance practice, said that cause could relate to insurance agents.
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“Where the reputation risk bleeds into the corruption risk is the globalization of businesses. It’s the expansion into new jurisdictions and growing increase in third-party populations, whether it’s with agents or relationships with a third party - there’s an exposure there,” Huff said, explaining that widely reported scandals heighten the reputation risk of corruption.
“Commission based or finder’s fees, or anything that has a variable compensation arrangement with third parties, is a risk for bribery and corruption to take place.”
Huff wouldn’t go as far as saying there was rampant corruption or bribery in the insurance market but did say it’s affecting people on the ground.
“What we’ve heard from respondents is they’ve all been touched by it,” Huff said.
“It’s a combination of knowing that those risks are out there, by having personal or corporate experiences with those issues, but it’s also the ever increasing regulatory environment. Even if there isn’t a perceived view within a company or industry that corruption is rampant, they understand the burden is on them in the case of any regulatory inquiry.”
It’s about getting in front of the problem before it happens, not chasing it once it’s come to light, Huff said.
“Where we’ve seen companies get in trouble is where they’ve been reactive, they’ve been ad hoc and only taken on any type of due diligence or screening when they’ve heard there might be a problem or something raised a red flag,” Huff said.
Have you experienced corruption or bribery in the insurance industry? Leave a comment with your thoughts and experiences below.
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