The financial regulator generally publishes its business plan in early spring. The plan for 2020/21 was released this week and is dominated by its approach to protecting customers and promoting stable and efficient markets during the coronavirus pandemic. It also highlights the challenges facing the UK financial services regime as we move towards the end of the EU transition period and summarises the particular scrutiny it will bring to bear on the main parts of the financial services sector, general insurance being one.
The regulator’s latest business plan is a fairly short document (26 pages) which is likely to have undergone a significant rewrite and a change in emphasis over the last few weeks. Front and centre are the steps the FCA has taken and will continue to develop in response to the coronavirus pandemic. In what would have seemed unthinkable just weeks ago, the regulatory challenges of leaving the EU look to have been pushed a little down the agenda – and rightly so in the current circumstances.
It would be all too easy to carp about the plan being rammed with regulatory jargon and light on specifics. The penultimate paragraph of the Chairman and CEO’s statement may at first sight smack of that:
In summary, we know we must both respond to change and initiate it. We must learn the lessons from the current emergency, our own experiments with data and the forthcoming reviews of past regulation, then embed them deeply into the way the FCA operates. And we must actively meet the challenges from market developments, EU withdrawal, new technology and consumers’ changing needs.
But on closer examination this passage captures the overriding challenges, priorities and activities remarkably well. For example, the five key priorities (coronavirus aside) explored in the plan – transforming how the FCA operates, enabling effective investment decisions, ensuring efficiency in consumer credit markets, making payments safe, and fair value in a digital age – clearly sit within the summary above.
Six strands of cross-cutting (ie non-sector specific) work are also set out. The work on ensuring that firms are prepared for the end of the EU transition period and the ongoing activity to reduce financial crime and fraud are particularly noteworthy. That another of these six topics is ‘culture in financial services’ speaks to the importance of effective leadership and governance across regulated firms.
Regarding general insurance & protection (GI&P), the business plan uses quite direct language: “Harm in this sector is caused by unfair pricing practices in personal lines insurance (covered under ‘fair value in the digital age’ in the business priority), unsuitable or poor value products and services, as well as remuneration practices in firms that drive down value to the customer.” An obvious conclusion from this is that although the FCA’s investigation into so-called ‘dual pricing’ in GI personal lines may have been delayed due to the pandemic it has very definitely not been shelved.
That work, along with the requirement properly to service the needs of vulnerable customers, look to be among the main reputational risks to the GI sector. Treating customers fairly remains a guiding principle for the regulator and clearly underpins its aim of making sure that “Customers take out GI&P products and services that are suitable for their needs and deliver on their promises at the time of claim.”
As has been the case for all of us, the FCA has needed to adapt what it does in response to the pandemic but it has however certainly not taken its eye off the ball or dialled down the scrutiny of the GI sector in any respect.