Dear CEO | Release Date: 29th September 2022
To read a longer summary of this Dear CEO letter, click here.
To access the original FCA document, click here.
Short Summary
The FCA’s recent letter to CEOs in the insurance sector highlights the heightened responsibility of firms amid the cost-of-living crisis, emphasising the need for robust support for customers facing financial difficulties. This letter builds on the FCA’s Consumer Duty introduced in July, which mandates firms to ensure fair value in their offerings and adequate consumer protection, effective from July 2023.
The FCA outlines specific expectations for insurance firms, including:
- Providing adequate support to financially vulnerable customers.
- Ensuring all insurance products offer fair value, with special attention to premium finance conditions to assess overall cost fairness.
- Addressing underinsurance by ensuring policies meet the customer’s needs and providing thorough product information.
- Handling claims promptly and fairly.
- Considering the needs of multi-occupancy building residents, particularly leaseholders, in their fair value assessments.
The letter stresses the importance of firms maintaining high service levels despite financial pressures, which could lead to increased operational risks and impact customer service quality, including claims handling. The FCA warns against the reduction of cover features and the introduction of higher excesses in a bid to cut costs, which could lead to underinsurance.
Firms are urged to prepare for the implementation of the Consumer Duty by integrating it into their strategies and ensuring they are ready to demonstrate compliance by the set deadlines. The FCA plans to monitor firms’ adherence closely and will take necessary actions, including multi-firm reviews and firm-specific interventions, to ensure compliance with rules and guidance.
Key takeaway for firms:
Ensure readiness for the Consumer Duty, proactively support customers during the cost-of-living crisis, maintain fair value and high service standards, and prepare for rigorous FCA oversight and potential regulatory actions.