Increased regulation “joined at the hip” with reputational risk

Insurance companies interested in reducing regulation need to take a hard look at their reputational risks, Scott Newquist, the managing director of the consulting firm Perception Partners, told a seminar organized by the Insurance Bureau of Canada (IBC).
Experience has shown us over the past 10 years that what causes regulation is a decline in reputation, said Newquist. Reputation is a function of whether you meet the expectations of your stakeholders.
If you dont meet the expectations of those stakeholders, no matter how ridiculous those expectations might be, your reputation is going to decline. And when your reputation declines, and you cant meet the expectations of your stakeholders, regulators have no choice but to act.
Newquist noted further that reputation is what people think about you, it has very little to do with reality. Nevertheless, he observed, companies must be careful to take the publics expectations into account, even if they appear to be exaggerated or unrealistic.
When expectations part with reality, he said, the key is for companies to be able to change peoples expectations so that they are more reasonable.
The expectations of shareholders, regulators and other interested parties can change quickly, he warned. What is true of the United States over the last five years is this, he said. What was accepted and legal yesterday is probably unacceptable to people, but still legal, today. And tomorrow it will be unacceptable and illegal, because the regulators will have to change their rules [to meet the publics changing expectations].