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FCA Regulatory Roundup - October & November 2017

The FCA has published its monthly round-up. Topics include a message from Director of Policy about the Insurance Distribution Directive.

“The IDD was finalised at European level in February 2016 and needs to be implemented in the UK by 23 February 2018, replacing the Insurance Mediation Directive (IMD). It aims to enhance consumer protection when buying insurance - including general insurance, life insurance and insurance-based investment products (IBIPs) – as well as to support competition between insurance distributors by creating a level playing field. Last month we published our third and final dedicated IDD consultation paper, as well as the first of three Policy Statements.

 The IDD is wide-ranging in its scope. The key areas it covers include:

  • professional and organisational requirements which apply to all insurance distributors, as well as prudential requirements which apply only to insurance and reinsurance intermediaries
  • conduct of business, and product oversight and governance requirements for all insurance business
  • additional conduct of business requirements for IBIPs business.

If your business involves insurance distribution it will be affected by the changes brought in by the IDD. You need to ensure you are compliant with the new rules when they come into force on 23 February 2018. This includes the directly-applicable delegated regulations (one covering product oversight and governance, and the other covering conduct of business rules for IBIPs) recently adopted by the European Commission. Your preparations should be well underway by now, with only four months to go.

We encourage you to let us know what you think by responding to CP17/33 by 25 November 2017. Look out for our remaining Policy Statements, planned for December 2017 and January 2018, as you finalise your implementation plans.”  David Geale, Director of Policy

See the newsletter here.


FCA: statement regarding ‘Firms falling short of renewal expectations’.

Multi-firm reviews published: 18/10/2017.

FCA has identified a range of concerns and are reminding those accountable that they need to ensure that they effectively manage regulatory change.

The FCA rules are intended to increase transparency and engagement in general insurance renewals. The rules apply when a firm sends a general insurance renewal notice to a consumer. They require firms to:

  • disclose last year’s premium at each renewal, so it is easily compared with the new premium offered
  • encourage consumers to check their cover and shop around for the best deal at each renewal
  • identify consumers who have renewed four or more consecutive times, and give them an additional message encouraging them to shop around
  • communicate this information in a way which draws attention

The FCA has been monitoring how firms are implementing the rules, and although FCA state that it has seen good practice, it has also seen several examples of firms who have failed to comply fully with the rules. Consumers may have lost out as a result.


Broader concerns

The FCA are concerned that firms were under prepared to implement the renewal transparency rules accurately.

FCA state that they consider these rules to be relatively straightforward, and are reminding firms of upcoming regulatory changes such as the Insurance Distribution Directive (IDD) and the Senior Managers and Certification Regime (SM&CR) which are more complex. Under-preparation for major regulatory change is not acceptable. Based on what the FCA has identified, they feel it is important to remind all firms of the need to ensure that regulatory changes are managed effectively in future.


Key findings

The areas where firms have failed to meet the rules fall into four broad categories:

  • Providing incorrect premium information
  • Failing to present the premiums and shopping around message clearly, accurately and in a way which draws the reader’s attention
  • Not implementing the rule changes for all products and customers
  • Failing to properly identify a ‘renewal’ as defined by the rules

The FCA expect firms to review their current processes and documentation (both direct to consumer and on-line) to ensure they are compliant and have captured all necessary renewals.

The FCA remind firms that they are required to ensure that the last year’s premium and additional shopping around messages are presented as key information in a clear prominent position and in a way which draws attention.

The FCA will continue to monitor compliance to ensure the effective implementation of the rules with a view to taking appropriate action where this is not the case.

See the publication here.


FCA: Understanding the financial lives of UK adults

Research published 18/10/2017 and updated 19/10/2017

Financial Lives is the FCAs first large-scale tracking survey of UK consumers and finance in the UK.

Based on nearly 13,000 face-to-face and online interviews, Financial Lives is the FCAs largest tracking survey on consumers and finance. It reveals a wealth of information about different types of consumer and their experiences of financial products and services.

It is the key source of information that underpins the FCAs consumer protection work and also provides valuable insights for any organisation focusing on consumers and finance.

Key findings

The results from this survey can be analysed in several different ways. The 2017 report provides initial results from the survey, highlighting some key facts and figures.

Click here.


MS17/2: Wholesale Insurance Broker Market Study

Relevant to wholesale broker market

The FCA has published the terms of reference for its Wholesale insurance broker market study, which will consider how competition is working in the sector. The FCA wants to ensure that the sector is working well, and fosters innovation and competition in the interests of its diverse range of clients.

The London insurance market is one of the world’s leading centres for large scale, complex commercial and specialist risks.  There have been significant changes in the wholesale insurance sector in recent years which has seen brokers developing new services and business practices. The FCA plans to explore how competition is currently working and whether it could work better in the interests of clients.

In the study, the FCA will:                     

Look at how brokers compete in practice and whether they use their bargaining power to get clients a good deal; assess what conflicts of interest exist, how they are managed and how they affect competition and client outcomes, and; examine how broker conduct impacts on competition in the sector.

The feedback period closes on 19/01/2018, and the interim report is expected in Autumn 2018

See the market study here