FCA has written a supervision strategy letter to the CEOs of personal and commercial lines intermediaries. The letter is intended for general insurance intermediaries with retail and/or commercial customers, loss assessors and ancillary insurance intermediaries.
FCA sees significant risks of potential harm in the markets, mainly because there is insufficient or unclear information at point of sale and firms use inappropriate sales tactics, leading to the risk that customers will bu unsuitable or poor value products. It sees an urgent need for improvements in governance and culture.
FCA notes the challenges COVID-19 has presented to firms, and have seen many put customers at the heart of their business model and gone the extra mile to help them. Others, though, have struggled and may fail. For these firms, FCA reminds them of the importance of resilience planning and the need to exit the market, if required, in an orderly fashion. It also stresses the need to wind-down in a way that continues to comply with FCA’s Rules and Principles.
FCA summarises the areas of risk as:
- governance and oversight – it will of course look in due course at how firms have embedded the SMCR;
- incentive arrangements that do not support a healthy culture;
- business models that allow firms to use elongated distribution chains with poor product oversight and control;
- business interruption – of course FCA expects firms to keep an eye on the test case outcome and react appropriately and also consider how they can meet customers’ information needs in relation to it; and