FCA Dear CEO letter – insurance brokers – product governance and attestation

The FCA has reminded firms that its enhanced product governance rules came into force on 1st October 2021, and that they apply to manufacturers and distributors of almost all general insurance or pure protection products.

Having found that a ‘material’ number of general insurance distributors needed to be asked to clarify whether they were indeed a manufacturer or distributor of general insurance products (having initially indicated in the FCA’s readiness survey that they were neither) the FCA is concerned:

  • that some firms have failed to understand the impact of the enhanced product governance rules; and
  • about the outcomes customers may experience as a result.

The FCA therefore expects firms to carefully consider the content of the letter and, if not already undertaken:

  • establish whether the firm is a manufacturer or distributor of general insurance products;
  • assess the impact of the enhanced product governance rules;
  • take the necessary steps to ensure compliance with the enhanced rules;
  • act promptly to address any gaps or shortcomings identified between FCA expectations and firms’ current arrangements; and
  • notify the FCA of any breach of its rules.

The FCA has also said that it was working on the final wording of the attestation form that price-setting firms will be required to submit.

The same form will also allow firms to make the necessary notification on cash or cash-equivalent incentives including commission rebating.

As the information for the first attestation is different to that of the second and subsequent annual attestations (no incentives / rebating notification on the first form?), the FCA will use the Qualtrics survey tool for the first attestation only, which it expects to issue to all general insurance firms and credit premium finance providers in early January 2022.

UKGI is a trading style of UKGI Limited and UKGI Services Limited which are wholly owned subsidiaries within UKGI Group Ltd. UKGI Limited Registered in England No. 03544014. UKGI Services Limited registered in England No. 04953835. All Registered Offices Number 22 Mount Ephraim, Tunbridge Wells, England TN4 8AS. VAT registration number 347 2664 82.