FCA writes to insurance product manufacturers and distributors about the deadline for compliance with the insurance pricing product governance remedy

On Friday 29th July the FCA e-mailed letters to all firms with general insurance permissions and those that manufacture or distribute pure protection products. The letters explained that following a multi-firm review and due to insurers and product manufacturers failing to engage in the process sufficiently, the 30th September 2022 deadline for conducting product governance and value assessments was moved back by three months to 31st December 2022, but only where certain conditions were met. See the FCA’s updated web page in relation to its pricing practices rules and the results of the multi-firm review.

If your firm manufactures or distributes general insurance and/or pure protection products, and you have not received the letter, please contact the FCA at firm.queries@fca.org.uk.

Although there is an extension until 31st December, distributors will still need to assess their products by 30th September against three conditions to see whether they qualify for the forbearance. If they do not qualify, distributors must still complete their product reviews by the existing 30th September deadline and, where they identify products that are not offering value, take appropriate remedial and mitigating action.

The circumstances that must be met for this forbearance to apply, and some suggested actions accordingly, are:

1. The distributor has identified the impact that the distribution arrangements have on the value of the product by 30th  September 2022 and has completed any identified remedial action as a result of its assessment. To identify any impact, the distributors must document their own assessment of the distribution arrangements.
2. The distributor has complied with any requests from the manufacturer for information specified in PROD 4.3.10BR. Distributors should retain their responses to information requests from manufacturers, to evidence that they have met the requirements for this circumstance.
3. The distributor is able to demonstrate they received the manufacturer’s value assessment too late for them to be reasonably expected to meet their obligations by 30th September 2022. Distributors must decide how long they will need, in reality, to carry out product reviews – so their reviews of the manufacturers’ assessments – and pick a realistic ‘by when’ date after which they can reasonably defend an effective statement to the FCA stating “we received these too late”.

In the letters, the FCA says it will be conducting further multi-firm review work looking at both manufacturers’ and distributors’ product governance and value assessment frameworks. This work ties in with significant parts of the Consumer Duty, namely the products and services outcome and the price and value outcome.

Firms should read the letters, consider the FCA findings and expectations and how they apply to their activities, and consider the suggested actions above. Any gaps or weaknesses in the current approach should be identified and firms should ensure explanations and evidence of any actions taken as a result are documented.

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.