FCA publishes business plan for 2018/19

The regulator published its latest business plan earlier this week. The year over which it has outlined its priorities will, of course, come to an end as the UK formally leaves the EU and, assuming the outline treaty holds, begins a 21 month implementation period / transition phase. Among key cross sector priorities affecting general insurance (GI) firms are data security and resilience, treatment of existing customers (ie tackling the issue of dual pricing) and the ongoing prevention of financial crime. GI specific priorities include further work on customer value in long distribution chains and on competition in the wholesale broker sector.

FCA CEO Andrew Bailey’s short foreword to the latest business plan sets the scene for the coming year and in it he states quite early on that Brexit “inevitably affects the amount of work we can undertake in other areas”. He references technology advances and cyber issues as key themes, in addition to culture and governance among regulated firms, noting the extension of the Senior Managers and Certification Regime (SM&CR) to insurers later this year. On the life and pensions side, ensuring consumers make good decision about retirement provision and “avoid pension scams and poor deals” are key concerns.

GI firms will be affected by the regulator’s cross-cutting work and by activity specific to this sector. It may be significant that the FCA uses what appears to be particularly robust language when addressing dual pricing:

“Firms should not give longstanding customers less attention than new customers or treat them in a way which results in poorer outcomes … While many firms have made progress in putting customers more firmly at the centre of their business models, they need to further improve both competition and their standards of treatment for existing customers.”

In the table below we summarise some of the principal areas of interest. Reference should however be made to the FCA’s plan to review its full list of priorities and related activities.

Issue Indicative delivery date
CROSS SECTOR PRIORITIES
Data security, resilience and outsourcing

  • ensuring regulated firms are resilient to cyber risks & technology outages
  • enhancing market integrity and protecting consumers
  • assessing risks of outsourcing and third party provision
 

ongoing basis

Innovation, big data and competition (strong link to data security priority)

  • allowing firms and consumers to maximise the FinTech opportunities (while protecting vulnerable consumers)
  • assisting firms via FCA Innovate and regulatory ‘sandbox’
  • publishing an updated MoU with the ICO following implementation of GDPR
 

 

ongoing basis

 

after May 2018

Treatment of existing customers (aka dual pricing)

  • conclude diagnostic work on household insurance
  • assess the need to act ensure future pricing practices work well for consumers
ongoing basis
Firms’ culture and governance

  • SM&CR to be extended to insurers
  • FCA to publish policy statement and new rules
 

October 2018
Summer 2018

Financial crime & anti money-laundering ongoing basis
GENERAL INSURANCE PRIORITIES
Diagnostic work on general insurance distribution chains

  • examining customer value in travel insurance, motor insurance add-ons and tradesman insurance
  • follows on from earlier thematic review of delegated authority & outsourcing
H2 2018
Interim report from wholesale insurance brokers market study

  • examination of competition in this sector
 

end 2018

Product design/oversight

  • implementing of the Insurance Distribution Directive (IDD) aimed at reducing risks of sales of unsuitable products
 

IDD in force 1 October 2018

Access to travel insurance

  • feedback on research into consumers with pre-existing medical conditions
 

Summer 2018

Three important topics are listed under the ‘Treatment of existing customers’ priority in the plan and merit further separate comment. The statutory regulation of claims management companies will move to the FCA (from the MoJ) some time in spring 2019, with the FCA to consult on draft rules later this year. The business plan notes that “While CMCs can provide access to justice for consumers who may be unwilling or unable to bring a claim themselves, some firms [ie CMCs] may not always operate in consumers’ best interests.” The current consultation on extending SME customers’ access to the FOS concludes soon, with a policy statement and final rules expected in the summer. The regulator will also examine claims inflation in general insurance, in particular by carrying out research “to assess how far brokers and motor insurers are inflating claims through referrals … and keeping volume discounts from their own repairers.”

It is evident from its business plan that the FCA is very definitely going to be active over the next year on many domestic issues of importance to the GI sector in spite of having to address the unavoidable regulatory behemoth that is Brexit.


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Written by Alistair Kinley, director of BLM’s policy and government affairs

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