The Chartered Insurance Institute (CII) has argued against a rigid, “one-size-fits-all” approach to regulating equality, diversity and inclusion (EDI) within the financial services industry.
When it comes to regulating EDI within the financial services industry, a culture of inclusivity is more crucial than simply adhering to a set of prescribed rules, according to Dr Matthew Connell, director of policy and public affairs at the Chartered Insurance Institute (CII).
Connell said: “The regulation aspect of [EDI] is focused almost exclusively on things that only the regulator can do, and the most important element is what’s happening in the market in terms of culture and practice on a day-to-day basis, and I think there’s several reasons for this.”
Connell was speaking on criticism faced by the Financial Conduct Authority (FCA) on regulation within the EDI space during a webinar hosted by the CII and Association of British Insurers (ABI), following the addressing the FCA EDI regulatory rules outlined by CP23/20.
He also emphasised the importance of understanding the unique needs of diverse customer groups and highlighted the benefits of data collection in promoting consistent reporting standards.
‘Developing situation’
Connell said: “I think sometimes the FCA gets criticised for rules not being prescriptive enough, or comprehensive enough, but I think there is an awareness, with the regulators and particularly with the FCA, that this is very much a developing situation.
“There’s a huge amount of test-and-learn that’s going on in terms of balancing out not just the needs of different protected groups, but also issues around intersectionality and how being a member of more than one protected group might change people’s circumstances.
“To understand where the FCA’s coming from, I think we’ve got to look at the wider statements that it makes, not just about EDI, but also about vulnerability, because it’s in that interaction with clients and making that interaction meaningful.
“I think the FCA sees the real heart of inclusivity and diversity, and how that can make a real difference for consumers and people working in financial services.
“In 2022, for example, the FCA had a policy statement on the Consumer Duty where it says ‘diversity is a lens that can help firms to better understand and meet the needs of their customers, including those in vulnerable circumstances’.
“We see significant practical benefits in firms exploring customer’s needs from different perspectives.
“And so, I think that’s really the encouragement in the Consumer Duty towards a culture of curiosity and learning, and applying specific solutions for specific consumers, especially through the lens of vulnerability, is at the heart of what the FDA is doing.
“So, if we only look at the rules the FCA is proposing, and not at the cultural change that they’re challenging us to make, I think that means that we as a profession would be missing out on something very fundamental, and it would invite, actually, the wrong kind of regulation, which is following up with more and more waves of prescriptive regulation that tends to be more one-size-fits-all.”