It’s never a bad idea to invest some time familiarising yourself with the annual business plans the FCA publishes outlining its regulatory priorities for the coming year and beyond. But for general insurance brokers and intermediaries, the FCA’s 2020/21 Business Plan is particularly essential reading.
To underline this point, the FCA sent out a Dear CEO letter earlier this month reminding personal and commercial lines intermediaries to consider and reflect upon the contents of its current business plan – and in particular those sections dealing with the significant risks of harm which it feels customers can face.
The FCA believes consumers are still at risk of purchasing insurance products that are unsuitable or that represent poor value for a number of reasons. These include the adoption of inappropriate sales tactics, business models with poor controls on sales, renewals and potential conflicts of interest, and a failure to provide sufficiently clear information on products.
The underlying problem, in the FCA’s opinion, is the persistence of unhealthy corporate cultures and inadequate corporate governance. The FCA has made clear that regulatory action to address these issues will be a key priority – and that firms who fail to take its concerns on board and respond appropriately can expect short shrift.
Along with the concerns noted above, the FCA’s business plan identifies additional drivers of potential harm to intermediary firms and their customers in the forthcoming termination of the transition period following the UK’s departure from the EU, friction from the litigation over business interruption cover, and distribution chain issues.
Financial strain on firms’ business models and the possibility of some failing due to the effects of the Covid-19 pandemic are an additional concern for the regulator. Hence stern warnings in the CEO letter that firms’ wind-down arrangements must be watertight, and that adherence to its rules and principles for business apply throughout.
Given all this, we strongly recommend that senior management take the time to take on board the relevant sections of the current FCA business plan. It’s important to review how the risks of harm highlighted by the regulator are currently monitored, addressed, and managed within your firm, and to identify where more needs to be done.
In the meantime, if you would like to know more about what the FCA’s current regulatory agenda means for your business, please call us on 01925 765777 to speak to one of our compliance experts, or email info@ukgigroup.com.