FCA BIBA speech 2024

Speaking at the 2024 BIBA Conference, FCA Chief Operating Officer, Emily Shepperd, urged brokers to take the initiative in demonstrating their value, particularly in the areas of commission design, combatting non-financial misconduct, and improving workplace culture. She emphasised that the long-term survival of brokers hinges on maintaining and enhancing their value to customers and the wider financial ecosystem.

Shepperd addressed the commission models in the sale of multi-occupancy insurance (MOBI) and guaranteed asset protection insurance (GAP), noting significant issues. For GAP insurance, she highlighted that only 6p of every pound of premium goes to pay claims, while 70p is spent on commission, raising concerns about fair value.

Acknowledging the volatile market conditions and threats such as cyber risks and climate change, Shepperd stressed the need for brokers to make use of data to anticipate risks and mitigate harm. Effective use of management information (MI) systems can demonstrate brokers' value to consumers and foster innovation. She emphasised that robust systems could turn challenges like climate change and AI into opportunities for brokers, enabling them to offer a wider range of future-proof products.

Shepperd also highlighted the importance of addressing non-financial misconduct and fostering healthier workplace cultures. She pointed out that poor governance and culture directly lead to poor customer outcomes. In response to findings of bullying, harassment, and discrimination in the financial services sector, the FCA has urged improvements in workplace culture.

On regulatory burdens, Shepperd indicated that the FCA is considering ways to reduce the burden on brokers, especially for insurance placed through overseas brokers. She acknowledged the need for regulation that works across the spectrum, from individual consumers to large corporations. The FCA has made changes to limit rules for insurance arranged through overseas brokers and is engaging with the industry to further reduce regulatory burdens.

Reflecting on the FCA's operations, Shepperd admitted that the regulator could improve communication about its intentions and regulations. The FCA has adopted measures to increase scrutiny and accountability, such as a secondary objective to facilitate economic growth and new performance metrics.

Shepperd assured that the FCA is sensitive to how regulation impacts smaller firms and is carefully considering feedback on proposals to publicise enforcement investigations earlier, which has sparked criticism across the financial services sector and from ministers.