Following last month’s news that shortfalls had been discovered within Lloyd’s of London’s whistleblowing program, insurance and financial service operators may well be taking a closer look at their own procedures to ensure they don’t come under the same regulatory scrutiny.

It was recently announced that the Bank of England would now be monitoring Lloyd’s to ensure the whistleblowing mechanism is reinstated and working effectively. This is because it was discovered the so-called ‘Speaking Up’ hotline was out of service for almost 18 months, which meant that about 1,000 staff could not report issues such as workplace bullying or sexual harassment.

So, what went wrong? It was reported that Lloyd’s had outsourced the hotline to an external provider, but the contract had expired in the autumn of 2017 and this was not renewed. This meant that Lloyd’s was unable to compile a satisfactory mandatory annual report on its whistleblowing program which was required internally.

Although the employees had access to an app and an email service, the hotline was the only anonymous channel. Those who tried to get through to Speaking Up after September 2017, were told to contact the Lloyd’s HR team, something which was totally inappropriate for those seeking confidentiality.

The failure has been reported to the Prudential Regulation Authority and the Financial Conduct Authority (FCA) and it will now be subject to rigorous scrutiny and must submit regular reports on how it is putting matters right to the PRA over the next three years. Lloyd’s said it was “disappointed” by the failure in its controls.

Clearly, there can be failings when dealing with any external supplier, but commentators are being particularly scathing of the failing since Lloyd’s was in the news after a number of harsh criticisms connected to the behavior of some of its employees.

In 2017, it banned its directly employed staff from drinking alcohol between 9am and 5pm and then in April 2019, it launched a new code of conduct which applied to all those working for businesses connected to the market who largely comprise many insurance brokers and syndicate employees. There are vast numbers of these – around 45,000 – who are ‘pass holders’ since they have access to the Lime Street headquarters where much business continues to be done.

The code said that any individual believed to be under the influence of drink or drugs would be banned from the building and have their pass confiscated. In addition, the bar inside the building was repurposed as a coffee shop.

Lloyd’s reputation has also been damaged by numerous accusations made for sexual harassment  – something an independent survey found had affected around one in 10 workers. In September of last year, chief executive John Neal said he was determined to tackle this, saying: “We must address the negative actions and behaviors that have for too long gone unspoken and with impunity.” But now that the whistleblowing hotline has been shown to be out of action for such an extended period, these words now have a hollow ring to them.

It should be noted that the survey was carried out among all the 45,000 who work at the marketplace, rather than just those directly employed, but it is still damaging to the Lloyd’s brand overall.

For other firms within financial services, there are some important issues to take note of. Firstly, whistleblowing must be taken seriously and while using an external supplier of the service is often a sensible way forward, checks should be made to see it is working effectively. Any service must also offer a genuinely anonymous reporting service – using email or telling staff to speak to HR does not meet requirements. Finally, any large business that uses suppliers may want to make it clear that it places high emphasis on ethics and that it expects all it does business with to ensure their people can whistleblow if they need to – if not, then this could impact on future commercial decisions.