Delegated authority audits should not automatically be cancelled due to Covid-19

Remote Auditing

During this unprecedented peacetime crisis, the health and well being of individuals is paramount. However, the oversight of distributors and service providers of insurance products remains an ongoing obligation. Amid the crisis disruption, the London Market team of Insurance Compliance Services (ICS) continues to deliver practical and flexible audits of entities operating through delegated authorities or due diligence of potential Coverholders/Claims’ TPAs.

Following the initial roll out of business continuity plans to ensure businesses could operate successfully at a distance, ICS has identified two key perceived challenges arising from remote audits; namely report delivery times and assessing ‘culture and values’.

The Market’s consultation with audit firms is indicating that remote audits take longer than the pre-COVID-19 onsite audits. It is not clear what metric is used for determining ‘audit length’, but using the time between the last remote interview (equivalent to the last day onsite) and the delivery of the full and final audit report to the audit firm’s Principal, ICS does not believe the remote aspect impacts report delivery expectations, quite the contrary.  The imperative to the onsite visit is ‘evidencing’; showing the auditor what has actually taken place as opposed to just telling them.  The fact that the vast majority of businesses have had to quickly set up data sharing for home workers means there are no issues in this regard; the information need to evidence an audit trail can be shared with the auditor in a number of ways within flexible time frames.

It could be argued that assessing the culture and values of an operation is more of a challenge without an auditor being onsite ie no face-to-face interaction. However, remote interaction still allows the auditor to assess culture through interviews (audio and video), documentation reviews, meeting notes etc.  In fact, the current situation we all find ourselves tells us a great deal about the firms we work with, and for. We can assess:

  • how well has the management team led and communicated developments to its staff and customers;
  • has the firm adapted it’s products, services and communications to changing demands and needs;
  • have they offered support to staff and showed concern for their well being; and
  • has the firm’s planning been robust enough to steer them through the crisis.

Lloyd’s have advised that delegated authority audits should not automatically be cancelled due to Covid-19 and that firms should make full use of remote file reviews, remote access to documents with interviews and meetings conducted by telephone or video conferencing facilities. Having undertaken a number of remote audits, with extremely positive feedback, ICS is well placed to deliver these in volume going forwards.