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

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 They also identify a worry that few products seem to have been withdrawn from the market, despite their concerns about value.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.