September 8, 2020
The portfolio letter, signed by Roma Pearson, FCA Head of Retail General Insurance, describes the regulator’s oversight strategy for companies grouped by business model in the insurance intermediary portfolio for retail and corporate customers. The FCA asks the recipients of the portfolio letter to review the extent of the risks in their business and to assess whether their strategies reduce these risks.
The regulator has identified customers buying unsuitable or inexpensive products as the greatest risk of potential and actual harm from companies in the portfolio. Inadequate or unclear information at the point of sale and inappropriate sales tactics contributed most to this damage, according to the FCA.
The letter states: “Robust governance and controls are essential to get good results for customers, but they alone are not enough to prevent damage from occurring. Healthy cultures and behaviors must be anchored in all organizations to prevent the control environment from being undermined. Improvements in corporate culture, governance and regulatory regimes will ultimately drive the change we are demanding of this market. ‘
Questions raised in the regulatory portfolio letter include:
- Covid-19, firm resilience and orderly processing.
- ineffective corporate governance and oversight.
- Incentive agreements that do not support a positive behavioral culture.
- Business models that have poor control over sales and renewals and conflicts of interest, including by appointed agents.
- Business interruption and how intermediaries can meet their customers’ information needs about the test case.
- EU withdrawal – the steps businesses need to take to be ready for January 1st, 2021.
BIBA members are requested to read the letter in full and can access the document via click here.
The FCA said it will work with a number of companies to meet its regulatory priorities. The regulator will also write again to companies in 2021 to provide their updated view of the main risks faced by the companies in this portfolio, the extent to which those risks are mitigated and their updated plans to monitor the sector.
Please direct questions about compliance and regulation of BIBA members to: [email protected].
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