This article has been provided by our partners at RWA Consultancy.
The annual BIBA conference was held in Manchester on 11 and 12 May. The FCA’s Sheldon Mills gave a speech outlining the vital role insurance brokers play in helping consumers and businesses access the insurance products they need, especially in times of uncertainty.
Mills, who is Executive Director, Consumers and Competition at the FCA, covered topics including innovation and growth, delivering better consumer outcomes and ESG, culture and diversity and inclusion.
All of this is set against the challenging background of the current economic climate and key risks within the sector.
Areas of note were:
- Innovation and growth – The FCA has recently launched its three-year strategy, outlining its ambitions for financial services across 3 key themes: reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change.
- Fair value – The rising cost of living is likely to lead to difficult decisions for consumers and may prompt them, in some cases, to opt out of certain types of insurance or reduce the level of cover for their existing policies. The FCA acknowledged that “higher prices may sometimes be appropriate, for example, if the cost base is greater because there is a different level of service or the distribution process is necessarily more complicated to meet the need of the customer.” The new Consumer Duty and its focus on the impact products and services can have on consumers was mentioned. It was stated that where insurance brokers are following other rules introduced over the last 5 years – the Insurance Distribution Directive (IDD), value measures, General Insurance Pricing and product governance rules – they should be well on the way to meeting FCA expectations under the proposed Consumer Duty.
- Pricing – There was a reminder that, following the rule changes in January, all renewal notices must now comply with the pricing rules, and a senior manager is required to attest annually that the firm has complied with the pricing rules to help end price walking.
- Client money – This is a key area of the FCA’s strategy to minimise risk and ensure that firms are operationally and financially resilient. FCA rules require that firms safeguard client money and maintain adequate wind-down plans – over half of brokers assessed by the FCA “have matters requiring attention within their client money arrangements.”
- Appointed Representatives (ARs) – The FCA has recently set up a new department to oversee the Appointed Representative regime and will be supervising these firms more closely to deliver better outcomes. Where ARs are used, the regulator expects good oversight of them.
- Diversity and inclusion – The FCA believes that a diverse and inclusive industry that can attract and develop talented individuals will help drive positive cultures in firms where individuals feel able to express their views, and speak up and raise concerns. The FCA’s work in this area is described as “proportionate and targeted” meaning that large firms will have greater expectations on them than smaller ones, but ultimately D&I should benefit everyone and help deliver better outcomes for consumers.
- ESG – Climate change was covered here and the FCA warned it will bring complex challenges for insurers and brokers to support society’s needs. The FCA stated that it will be seeking to understand from insurers and brokers how they are managing these ESG-related risks.
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