Pricing information report form REP021 All firms should complete this section for:

a) premium finance – for insurers and intermediaries the business where they set the price and where the price is not set by an insurer or an intermediary the business must be reported by the customer-facing firm;
b) add-ons – the business where they set the price; and
c) fees and charges in addition to the premium – the fees charged by the firm.

6.01

Product

• Motor

 

Tenure

Premium finance

T0

T1

T2

T3

T4

T5

T6

T7

T8

T9

T10+

6.02

Total charged (£) for retail premium finance in the reporting period

6.03

Number of core motor and home and any add-on policies incepted with retail premium finance in the reporting period

6.04

Number of policies incepted/or renewed in the reporting period with an APR:

Of 0%

Between 0.1% to 9.9%

Between 10% to 19.9%

Between 20% to 29.9%

Between 30% to 39.9%

Between 40% to 49.9%

50% or more

Add-ons

6.05

Total gross written premiums (£) for add-ons incepted or renewed in the reporting period

6.06

Number of add-ons incepted or renewed in the reporting period

Fees and charges in addition to the premium

6.07

Total pre-contractual fees/charges (£) charged to customers in the reporting period

6.08

Average pre-contractual fees/charges (£) per customer who was charged a fee in the reporting period

6.09

Total post-contractual fees/charges (£) charged to customers in the reporting period

6.10

Average post-contractual fees/charges (£) per customer who was charged a fee in the reporting period

 

 

6.01

Product

• Home

 

Tenure

Premium finance

T0

T1

T2

T3

T4

T5

T6

T7

T8

T9

T10+

6.02

Total charged (£) for retail premium finance in the reporting period

6.03

Number of core motor and home and any add-on policies incepted with retail premium finance in the reporting period

6.04

Number of policies incepted/or renewed in the reporting period with an APR:

Of 0%

Between 0.1% to 9.9%

Between 10% to 19.9%

Between 20% to 29.9%

Between 30% to 39.9%

Between 40% to 49.9%

50% or more

Add-ons

6.05

Total gross written premiums (£) for add-ons incepted or renewed in the reporting period

6.06

Number of add-ons incepted or renewed in the reporting period

Fees and charges in addition to the premium

6.07

Total pre-contractual fees/charges (£) charged to customers in the reporting period

6.08

Average pre-contractual fees/charges (£) per customer who was charged a fee in the reporting period

6.09

Total post-contractual fees/charges (£) charged to customers in the reporting period

6.10

Average post-contractual fees/charges (£) per customer who was charged a fee in the reporting period

 

Further to our October Newsletter on this topic, we have drafted a format for you to adapt and implement, to assist you in providing the additional information to be disclosed to Residential Leaseholders in Multi-Occupancy properties, for cases incepting, or renewing, from 31.12.23 onwards.

 

The Policy Statement can be found at PS23/14: Multi-occupancy building insurance: Feedback to CP23/8 and final rules (fca.org.uk).

 

As a reminder, a ‘Leaseholder’ is a tenant within the meaning of section 30 of the Landlord and Tenant Act 1985 including a recognised tenants’ association. The Rules will also apply to a ‘policy stakeholder’, being any individual obliged to pay premium. For simplicity we have used the term ‘Leaseholder’ in the remainder of this newsletter.

 

To be clear, the Rules do not apply to Commercial Leaseholders.

 

Required disclosure.

 

You will need to provide additional information to Leaseholders, as soon as reasonably practical following conclusion of the contract.

 

This information can be sent to the Policyholder, or Property Managing Agent, with an instruction to distribute it to Leaseholders (or send direct to the Leaseholder if you are in touch with them). The FCA has not prescribed a format for the disclosures, but we would suggest something along the following lines. Please adapt to suit the specific circumstances of the case.

 

Words in italics are for your information and should be deleted from the outbound communication :

 

----------------------------------------------------------------------------------------------------------------------------

 

Dear (Leaseholder)

 

Financial Conduct Authority Rules now require that we supply additional information to the occupants of Residential Multi-Occupancy properties, following Renewal (or inception) if the insurance cover for the building.

 

• We attach a summary of the features of the policy, including main benefits, coverage and exclusions of the policy, duration, and insured sum (produced by insurer).

 

• The policy premium for the building is £XXXX ( Where the policy covers a portfolio of buildings, firms must disclose the premium at building or dwelling level this can be an estimate and is to be produced by insurer).

 

• Our Remuneration for arranging cover is £XXX (including contingent commission and potential profit share, please ensure that this the commission on the premium quoted above)

 

• XYZ will also receive £XXX (if any remuneration is paid to other parties including unregulated Property Managing Agents and freeholders. Delete if not applicable)

 

• Information about potential conflicts of interests, such as ownership links between the intermediary and the insurer (delete if not applicable).

 

• We have obtained quotes from a single insurer only OR We have obtained quotes from X insurers before selecting this insurer (the number of alternative quotes you have obtained with further details of these to be provided on request).

 

• We are happy that the insurer selected provides cover adequate to meet the insurance needs of both the freeholder and leaseholders.

 

----------------------------------------------------------------------------------------------------------------------------

 

Further support

 

You will be expected to deal with queries, either from the Policyholder, or any Leaseholder, in a way which ensures ‘Good outcomes’ for all parties. So, if the Freeholder or PMA has failed to provide the required information, and you are asked for any of the information by a Leaseholder, you will be expected to respond to them.

 

Action Required

 

You will need to identify cases impacted by the new Rules, prepare appropriate disclosure processes and formats and be ready to field queries from Leaseholders.

 

As always, we are happy to discuss any issues arising.

YOUR COMPLIANCE MATTERS – FCA Consultation Diversity and inclusion (D&I) in the financial sector

 

Relevance:                   All Firms.

 

Action required:         Consider any issues you may have with the concerns raised by the FCA. New Rules will be in place in 2025.

 

 

The FCA has published a Consultation CP23/20: Diversity and inclusion in the financial sector – working together to drive change (fca.org.uk). The Consultation period runs to 18/12/2023. There will be a Policy Statement some time in 2024 (followed by a 12-month implementation period).

 

The FCA has stated that ‘The degree to which firms reflect the societies they serve and how open a culture they create is central to each of the objectives set for us by Parliament: to protect consumers, enhance market integrity, support competition in financial services and facilitate UK competitiveness and economic growth.

 

That is why, together with the Prudential Regulation Authority (PRA), we have been clear that diversity and inclusion are regulatory concerns. Yet, the evidence suggests the financial services sector is not yet where we should be.

 

We are clarifying and strengthening our expectations around non-financial misconduct, which will apply to firms large and small, across the financial services sector’.

 

In this consultation, the FCA sets out proposals to better integrate non-financial misconduct (NFM) considerations into staff fitness and propriety assessments, Conduct Rules, and the suitability criteria for firms to operate in the financial sector (Threshold Conditions).

 

In practice this would mean the FCA:

 

-      Would expect that staff are held to high levels of fitness and propriety (and any evidence of workplace bullying or discrimination need to be taken in to account).

 

-      Will expand the Conduct Rules to make clear that workplace bullying, harassment and similar behaviours are to be considered as misconduct.

 

-      Would consider evidence of discrimination as impacting the suitability of the firm to be authorised by them.

 

They are also proposing all firms to report their average number of employees on an annual basis (firms already do this via the 6 monthly RMAR).

 

Larger, FCA authorised firms (those with 251 or more employees calculated on a solo entity, rather than group basis) will need to:

 

• collect, report, and disclose certain D&I data

• establish, implement, and maintain a D&I strategy

• determine and set appropriate diversity targets

• recognise a lack of D&I as a non-financial risk’

 

 

Action Required

 

We hope that the proposals will not cause any great concern, but you need to consider any current cultural issues within your business. As always, we are happy to discuss.

 

YOUR COMPLIANCE MATTERS – FCA Multi Occupancy Leasehold Insurance Rules effective 31.12.23

Relevance:                   All Firms.

Action required:         Prepare for additional disclosure Rules and review your approach to commission, and your commercial arrangements with any parties receiving a share of your remuneration.

Following consultation, in April 2023, the FCA has published new Rules in Policy Statement PS23/14: Multi-occupancy building insurance: Feedback to CP23/8 and final rules (fca.org.uk) relating to the treatment of Leaseholders in Multi Occupancy buildings.

 The new Rules come into effect for contracts renewing, or incepting, from 31.12.23.

 A ‘Leaseholder’ is a tenant within the meaning of section 30 of the Landlord and Tenant Act 1985 including a recognised tenants’ association. The Rules will also apply to a ‘policy stakeholder’, being any individual obliged to pay premium. For simplicity we have used the term ‘Leaseholder’ in the remainder of this newsletter.

 To be clear, the Rules do not apply to Commercial Leaseholders.

 One point to note from the Consultation was the very high level of input from Leaseholders themselves (generally pushing for more rapid implementation). You should therefore expect a good level of awareness amongst leaseholders, so expect to be called out if you do not comply. You also need to ensure that your staff clearly understand the Rules.

  Leaseholders as customers

  Leaseholders will need to be treated as ‘customers’, requiring firms to act in the best interests of the leaseholder and bar firms from recommending products based on commission or remuneration levels.

Disclosure

Insurers and brokers will need to provide additional information to Leaseholders, as soon as reasonably practical following conclusion of the contract, including:

 

• A summary of the features of the policy, including main benefits, coverage and exclusions of the policy, duration and insured sum (produced by insurer).

 

• The policy premium. Where the policy covers a portfolio of buildings, firms must disclose the premium at building or dwelling level (this can be an estimate and is to be produced by insurer).

 

• Remuneration (including contingent commission and potential profit share) which any authorised intermediary receives for arranging the insurance, as well as remuneration they pay to other parties including unregulated Property Managing Agents (PMAs) and freeholders (all to be stated in cash terms).

 

• Information about potential conflicts of interests, such as ownership links between the intermediary and the insurer.

 

• The number of alternative quotes the intermediary has obtained (with further details of these to be provided on request) and a brief explanation of why they have proposed or recommended that the policy is in the interests of both the freeholder and leaseholders.

 This information can be sent to the Policyholder or PMA, with an instruction to distribute it to Leaseholders (or sent direct to the Leaseholder if you are in touch with them). The FCA has not prescribed a format for the disclosures.

 You will be expected to deal with queries, either from the Policyholder, or any Leaseholder, in a way which ensures ‘Good outcomes’ for all parties. So, if the Freeholder or PMA has failed to provide the required information, and you are asked for any of the information by a Leaseholder, you will be expected to respond to them.

  Product Governance

 The FCA is changing the PROD rules to include leaseholders as customers for the purposes of PROD 4. This would require insurers and intermediaries to:

 

• Consider leaseholders as a relevant part of the target market when designing, pricing and distributing their products.

 

• Demonstrate that products provide fair value to leaseholders as well as any other customers. This means there must be a fair relationship between the total price and the overall benefits leaseholders receive.

 The FCA has stated that they expect these rules to have an impact on current remuneration practices. Intermediaries who receive percentage-based commissions that have increased in absolute amounts as risk premiums have risen would likely need to reduce the percentage they receive. Earnings that increase purely because of premium increases would be unlikely to reflect additional benefits provided to leaseholders, so would not meet FCA fair value requirements.

 Additionally, firms would need to consider the amount of remuneration they share with other parties in the distribution chain, such as freeholders and PMAs. The Rules would not allow such payments unless firms can demonstrate they provide fair value to leaseholders.

  Action Required

  You will need to identify cases impacted by the new Rules, prepare appropriate disclosure processes and formats and be ready to field queries from Leaseholders.

 As always, we are happy to discuss any issues arising.

YOUR COMPLIANCE MATTERS – Personal and Commercial Insurance Portfolio letter September 2023

Relevance:                   All firms

Action required:         Review FCA feedback against your own position.

The FCA sent out a Personal and Commercial Lines Portfolio letter, on 20th September, providing an update on their priorities for the Insurance market for 2023-25.

A link to the letter is here  https://www.fca.org.uk/publication/correspondence/personal-commercial-insurance-market-priorities-2023.pdf

The FCA highlights the challenges that the market continues to face with ongoing the cost of living problems, and other issues arising from climate change, AI and resource, post covid.

The FCA has confirmed its priorities, both across the market and the specific issues with Personal and Commercial Insurance.

Market wide issues:

Putting Consumers' needs first; Embedding the Consumer Duty – this is covered in more detail below.

Environmental, Social & Governance priorities: Governance and Culture- the FCA specifically comment that ‘Firms should be able to show how they are actively working towards having a diverse workforce at all levels in their organisation.’ This issue is subject to a separate Consultation Paper CP23/20: Diversity and inclusion in the financial sector – working together to drive change (fca.org.uk) and we will send a out a separate note on this issue.

Operational resilience and the increasing reliance on Third Parties – concerns here relate to oversight of outsourced activities and business recovery planning.

Improving oversight of Appointed Representatives – a subject we are already addressing with clients affected by the new Rules.

Personal & Commercial Lines Insurance specific priorities

Putting consumers’ needs first - the FCA is concerned about issues covered by the Consumer Duty:

-      Price and Value –, in this case, they highlight ongoing concerns about distribution costs, the quality of MI, premium finance and continued ‘Price walking’. They also identify a worry that few products seem to have been withdrawn from the market, despite their concerns about value.

-      Consumer Support – ‘We expect firms to continue to support customers in financial difficulty and reflect on whether they need to do more.’

-      Claims – helping customers understand claims settlement offers, the speed of claims resolution, poor motor total loss offers from insurers.

-      Access – ‘We continue to see examples of consumers facing barriers to easily accessing affordable or suitable insurance or being unable to buy insurance at all’. The expectation is that we address issues for particular customer groups (vulnerability), poor product design, signposting travel cover solutions for customers with pre-existing medical conditions.

-      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.’

Strategy for positive change – Environmental, Social & Governance priorities: 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.’ The issue of non-financial misconduct is also covered by the Consultation Paper, mentioned above.

Ongoing Supervision

Clearly, the above issues will be the focus for supervision work. We believe that you will need to be able to evidence that you have addressed the concerns raised and we will be working with firms to put together a defensive document.

If you have any immediate concerns, please get in touch with your usual contact. 

YOUR COMPLIANCE MATTERS – Additional RegData return from January 2024

 

Relevance:             All Firms.

 

Action required:     Awareness only, no immediate action.

 

The FCA has published a Policy Statement, PS 23/3 PS23/3: Creation of a baseline financial resilience regulatory return: Feedback to CP22/19 and final rules (fca.org.uk)

 

The Financial Resilience Surveys (previously Covid Financial Resilience Surveys) , which the FCA has been requesting on a regular basis, will no longer be required after the end of 2023.

 

These will be replaced by a reduced report to be completed on a quarterly basis, in line with the firm’s financial year end, to be submitted via RegData. The return needs to be submitted within 20 business days of the end of the reporting period.

 

The Policy Statement confirms the information requirements, as follows:

 

1 Total amount of liquid assets that you control or have unrestricted access to

2 Average monthly cash needs arising from fixed costs.

3 Net profit or loss in the last quarter

4 Revenue for the financial year to date

5 Net asset or liability position

 

They have also provided guidance notes on the information required which will sit behind the data sheets in the RegData system (the guidance is included in the Policy Statement).

 

Unfortunately, this means that the number of scheduled reports to be completed each year continues to increase (although the irregular nature of the ad hoc Resilience Surveys will now be given some structure).

 

Once the reports become available, we will of course provide any assistance needed in completing them. They will appear in your normal reporting schedule, and you will receive reminders of the due date from the FCA.

 

We are happy to discuss any specific issues that you may have so please get in touch with your usual contact.

 

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YOUR COMPLIANCE MATTERS – FCA Multi Occupancy Leasehold Insurance reforms

 

Relevance:                   All Firms.

 

Action required:         Review customers subject to potential new rules, and your commercial arrangements with any parties receiving a share of your remuneration.

 

 

On 21 April 2023, the FCA published a Consultation Paper, available here FCA sets out multi-occupancy leasehold insurance reforms | FCA relating to the treatment of Leaseholders in Multi Occupancy buildings.

 

A ‘Leaseholder’ is a tenant within the meaning of section 30 of the Landlord and Tenant Act 1985 including a recognised tenants’ association.

 

CP 23/8 consults on new rules to be published in Q3 (the deadline for any response to the Consultation Paper is 9 June 2023) with a three-month implementation date.

 

Proposed Changes

 

·      Leaseholders would need to be treated as customers, requiring firms to act in the best interests of the leaseholders and bar firms from recommending products based on commission or remuneration levels.

 

·      Additionally, insurers and brokers will need to provide additional information to Leaseholders, including:

 

-     A summary of cover.

-     Pricing information.

-     Remuneration information

-     Placing and shopping around information.

-     Conflicts of interest information.

 

This information can be sent to the Policyholder, with an instruction to distribute it to Leaseholders (or direct to the Leaseholder if you are in touch with them).

 

·      For the first time, the FCA is specifying that the total amount of commission generated must be disclosed alongside information relating to any payments made to third parties (the freeholder or property managing agent, for example). These disclosures need to be in cash terms.  

 

·      The FCA has said ‘We expect brokers to immediately stop paying commissions to third parties (including property managing agents and freeholders) where they do not have appropriate justification and evidence for doing so in line with our rules on fair value. We will undertake further reviews across various products and will consider the full range of regulatory tools available to us as this work is progressed.’

 

·      You will be expected to deal with queries, either from the Policyholder, or any Leaseholder, in a way which ensures ‘Good outcomes’ for all parties.

 

Action Required

 

Once the consultation period finishes and new rules are published, the implementation date will be tight.

 

Clearly, there will be very little time for any current commercial arrangements to be reviewed, if you are intending to change them in advance of the rules coming into force.

 

We are happy to discuss any specific issues that you may have so please get in touch with your usual contact.

YOUR COMPLIANCE MATTERS – FCA Dear CEO letter - Implementation of the Consumer Duty  

Relevance:                   All firms

Action required:         Review FCA feedback against your own plans.

The FCA sent out a “Dear CEO/Director” letter on 3 February 2023, relating to the above issue.

A link to the letter can be found here Implementing the Consumer Duty in the General Insurance and Pure Protection sectors (fca.org.uk)

The letter provides a reminder of the requirements, although we do not intend to repeat them here (please see our previous newsletters on this topic).

However, in summary:

·      Remember the Consumer Duty applies to both Commercial and Consumer “retail” business. It does not just apply to personal lines insurance.

·      The implementation deadline is 31 July 2023.

·      The FCA has previously sent out guidance relating to customers in financial difficulty. The Consumer Duty has a particular focus on vulnerability generally, but the FCA is highlighting the fact that financial difficulties are a key issue currently.

·      Firms should already be complying with the Product Governance rules (which make up a large part of the new consumer duty requirement). It is worth checking that you are comfortable that you have everything in place in this regard.

·      Firms should be reviewing their communications with customers, and service delivery, in order to ensure that they are as effective and timely for mid-term changes, cancellations, complaints, and claims as they are for new business.

·      Claims processes and outcomes are a particular concern (the FCA point out that this is the point at which a customer actually receives the benefit of the product they have paid for). If you are dependent on any third party providers in this regard, you need to be supervising them very closely.

·      For firms with Appointed Representatives, bear in mind that you are responsible for their implementation and compliant with the consumer duty.

Supervisory Activity

From the reviews already completed by the regulator there are some issues that it believes need greater focus:

·      Effective prioritisation of implementation plans.

·      Effective embedding of the new requirements (too many firms seem to be assuming that their current processes will be compliant with some tweaking).

·      Liaison with other firms, where this is necessary, (again, the regulator has picked up issues relating to distribution chains).

Ongoing Supervision

Clearly, this particular issue is not going to go away, and the regulator is planning to engage with firms on an ongoing basis in order to check progress.

There is a particular reminder for Directors and Boards of Directors to challenge implementation plans as the FCA believes that this should be a key priority.