The FCA has commenced a second wave of product oversight and governance thematic review work, to understand whether the product reviews, including fair value assessments and product distribution reviews are being undertaken in line with the FCA’s expectations as set out under PROD 4 of the FCA Handbook. Selected firms will have received a request to complete the questionnaire by 11th August 2023, but UKGI understands that the British Insurance Brokers’ Association (BIBA) is lobbying the FCA to push the date back to 1st September in view of the holiday period.
The FCA is expecting to conclude the review by the end of Q1 2024, following which it will report its findings to the selected firms and to the wider market. Any feedback highlighting areas of significant interest or concern will also be directed to the firms.
Even if your firm has not been selected for the FCA’s review, it may still be beneficial for your firm to:
- identify those within the firm who are responsible for product governance and oversight, as well as any senior managers who hold responsibility in this area;
- assess that current product governance frameworks are appropriate and can demonstrate compliance with PROD 4 (and therefore the Consumer Duty);
- demonstrate that the products provide fair value to customers in the target market, and whether it will continue to do so for a reasonably foreseeable period;
- undertake regular product reviews, including fair value assessments as outlined in PROD 4; and
- recognise where a product is not offering fair value and removing it from the market where necessary.
The FCA has previously expressed disappointment with the progress made by a material proportion of manufacturers, which fell short of expectations (with the deadline for fair value assessments having to be extended 30 September 2022 to 31 December 2022), and the lack of effective cooperation between manufacturers and distributors.
In addition, there are concerns that, despite the rules coming into force on 1 October 2021, there are still products that have not been withdrawn from the market for not providing fair value nearly two years on from its implementation.
The FCA has warned that trying to take a “one-size-fits-all” stance or leaving implementation until the last minute is unlikely to result in a compliant process and/or would not ensure that customers are getting the fair value that they deserve.
With the implementation deadline for the new Consumer Duty also now entering its final weeks, firms will be under greater scrutiny to offer value and fairness to customers as well as to protect them from foreseeable harm on the lead up to, and beyond 31st July.