The FCA has set out its priorities for the insurance market for the next three years, outlining specific risks of harm, and outlining the regulator’s expectations for firms to manage these issues. Matt Brewis, the FCA’s Director of Insurance Supervision, Policy & Competition – Consumers & Competition, has written separately to the personal and commercial lines insurance market (insurers and intermediaries) and to the wholesale insurance market.
Whilst the UK insurance market covers a broad and diverse range of firms, the FCA’s main focus is on four market-wide priorities, alongside sector-specific priorities under their strategic outcomes and commitments.
Personal & Commercial Lines Insurance specific priorities, putting consumers’ needs first:
- Price and value: firms must be looking at the relationship between the overall price paid by the customer and the quality of the service or benefit provided. The FCA is concerned that, when reviewing firms’ Consumer Duty implementation plans, the FCA continue to see weaknesses in MI, examples of insurers and intermediaries not sharing information, and distribution chains that are longer than necessary (in the FCA’s opinion).
- Consumer support: costs are increasing for both customers and firms. The FCA expects firms to continue to support customers in financial difficulty and reflect on whether they need to do more. If firms require more information on how they can help consumers, there is a web page on insurance guidance on supporting customers in financial difficulty (introducing the Policy Statement PS23/9, which in turn introduced the new Section in the FCA Handbook, ICOBS 2.7).
- Claims: firms should also make sure consumers have enough information to understand the implications of the different claims settlement options available to them, particularly consumers in vulnerable circumstances.
- Access: firms should ensure that product design appropriately considers outcomes for different groups so that consumers have access to products that provide suitable coverage at a fair price.
- Sales Practices: firms must ensure that any product they propose to the customer is consistent with their demands and needs and that customers must be provided with appropriate information about the product so they can make informed decisions. The FCA is concerned some customers may not understand that the coverage under these policies is less than they may be used to.
Strategy for positive change, our Environmental, Social & Governance priorities:
- Note: these requirements apply to insurers and intermediaries which are enhanced scope SM&CR firms; they do not apply to intermediaries which are core or limited scope SM&CR firms. Governance, culture, and non-financial misconduct: all insurance firms should reflect on their culture to ensure an inclusive culture where employees have the appropriate channels and feel psychologically safe to be able to speak up and raise concerns without fear. Culture is still a key area of focus in the way the FCA supervise firms. The FCA expect firms to be ready to show the FCA how they are making progress in this area.
Firms are responsible for ensuring that they meet the FCA’s requirements, including the obligations and expectations outlined in the Portfolio Letters. Firms should take all necessary action to ensure these are met and that they are prepared for the additional requirements that the Consumer Duty brings to these priority areas. The FCA will use the Senior Managers & Certification Regime to engage directly with accountable individuals on areas of concern.