Portfolio Strategy Letter to firms in the Personal & Commercial Lines Insurer (PL&CL) portfolio: identifying and remedying harms

Dear Board of Directors | Release Date: 8th January 2020

To read a longer summary of this Dear Board of Directors letter, click here.

To access the original FCA document, click here.

Short Summary

The FCA’s letter to CEOs in the Personal & Commercial Lines Insurer (PL&CL) portfolio outlines significant risks and the expected regulatory compliance from firms. It emphasises the need for firms to enhance their cultural practices towards a focus on conduct and consumer outcomes. A major concern is that many firms do not consistently provide products that meet consumer needs or justify the costs, which could result in harm to consumers.

The letter highlights several areas of supervisory focus including the proper oversight of distribution chains and ensuring that remuneration practices do not encourage mis-selling or provide poor value to consumers. It stresses the importance of products being appropriately designed and priced, with clear, fair, and not misleading communication to consumers.

Another significant area of focus is the governance of pricing strategies, where the FCA has found that practices often prioritise business and financial goals over consumer outcomes, leading to unfair practices in product pricing and renewal processes. The FCA is also concerned with firms’ management of regulatory changes, particularly around ensuring operational controls are robust and that firms are adequately prepared for the end of the Brexit transition period.

Key Take-aways and Actions for Affected Readers:

PL&CL firms are urged to review their operational practices and governance structures to ensure they align with FCA regulations and truly serve the best interests of consumers. This includes improving the management of distribution chains, ensuring clear and fair pricing strategies, and enhancing operational resilience. Firms should also be prepared for further reviews by the FCA, especially regarding their compliance with upcoming regulatory changes post-Brexit. Compliance with these expectations is critical to avoid potential regulatory actions.