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Dear CEO | Release Date: 14th December 2022

To read a shorter summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Long Summary

In response to the ongoing cost of living crisis in the UK, the Financial Conduct Authority (FCA) has issued a directive specifically targeting life insurers. This directive is a crucial part of a broader initiative to ensure that financial institutions support the most affected segments of society during these turbulent economic times. Life insurers are pivotal in providing financial security and must adapt their operations to the evolving economic landscape characterised by increased market volatility and rising living costs.

FCA’s Expectations of Life Insurers

The FCA has clearly articulated its expectations from life insurers, emphasising that these firms should intensify their efforts in several key areas to support their customers effectively. These expectations align with the forthcoming implementation of the Consumer Duty principles.

Protection Products

Given the financial pressures on consumers, there is a potential increase in the lapse or cancellation of protection products. The FCA expects life insurers to:

Monitor and Understand Trends: Life insurers must diligently track policy arrears or cancellations to grasp the reasons behind these trends. Understanding these patterns is vital for addressing customer needs proactively.

Provide Flexible Payment Options: Insurers are encouraged to offer flexible payment solutions such as payment holidays or revised payment schedules, especially for customers facing financial hardships.

Enhance Communication: Insurers must ensure that communications are clear and provide customers with all necessary information to make informed decisions about their protection products. This includes the implications of reducing coverage or cancelling policies.

Manage Premium Reviews with Sensitivity: When conducting reviews that could result in premium increases, insurers should consider the financial strain on customers and communicate any changes clearly and in advance.

Pensions, Long-term Savings, and Retirement Income

The rising cost of living is likely influencing customers’ saving and investment behaviors, potentially leading customers to alter their pension contributions:

Inform on Consequences: Insurers should communicate the long-term consequences of reducing pension contributions, such as missing out on employer contributions and the risk of inadequate retirement funds.

Highlight Investment Risks: Customers should be made aware of the risks associated with altering their investment strategies, especially in a volatile market.

Encourage Continued Engagement: Insurers should make it easy for customers to restart their contributions and keep them engaged with regular updates.

Use Data Proactively: Using analytics to identify customers at risk of making detrimental financial decisions is crucial. Insurers should engage these customers early to prevent potential harms.

Customer Value and Product Pricing

As market conditions evolve, life insurers must:

Assess Product Value Continuously: Insurers need to continually evaluate the value their products offer, ensuring they remain fair and appropriate under current economic conditions.

Ensure Transparency and Fair Pricing: Pricing strategies, especially for products involving long-term financial commitments like annuities, must be fair and transparent.

Adapt to Market Changes: Product strategies should be responsive to ongoing economic shifts, ensuring alignment with consumer needs and regulatory expectations.

Customer Support and Vulnerability

With increasing economic strain, enhanced support systems for customers, particularly those vulnerable or in financial distress, are essential:

Strengthen Support Mechanisms: Develop robust systems to support customers in financial distress, including tailored support for those with vulnerabilities.

Train Staff Appropriately: Ensure that customer-facing staff are well-trained to handle sensitive interactions effectively.

Ensure Operational Resilience: Maintain high levels of service without disruption, ensuring continuity and reliability in customer support.

Scams Prevention and Security

Given the heightened risk of scams during economic downturns, insurers must intensify their efforts to protect customers:

Enhance Scam Detection and Prevention: Strengthen frameworks to detect and prevent scams, safeguarding customers from potential fraud.

Educate on Scam Awareness: Implement comprehensive strategies to educate customers on recognising and avoiding scams.

Monitor Emerging Scam Trends: Stay vigilant against new scam tactics and adjust preventive measures accordingly.

Operational Resilience

Ensuring operational resilience is more crucial than ever:

Robust Governance and Management: Implement robust governance frameworks to effectively manage and mitigate operational risks.

Invest in Critical Function Resilience: Focus on enhancing the resilience of critical business functions to withstand disruptions.

Manage Third-party Risks: Maintain strict oversight of third-party service providers to minimise the risk of operational disruptions.

Strategic Actions and Takeaways for Life Insurers

Life insurers must undertake comprehensive actions to effectively meet these FCA expectations:

Review and Adapt Insurance Products: Regularly reassess products to ensure they meet the needs of the current economic climate and comply with new regulations.

Enhance Communication and Customer Engagement: Develop clear, comprehensive communication strategies that keep customers well-informed and engaged.

Support Vulnerable Customers Effectively: Implement robust processes to identify and support vulnerable customers, ensuring staff are equipped to handle these interactions with the necessary sensitivity and expertise.

Build Operational and Financial Resilience: Strengthen both operational and financial practices to ensure the insurer can withstand economic shocks and continue to provide reliable services to customers.


This comprehensive analysis of the FCA’s directive for life insurers outlines a roadmap for enhancing practices to support customers effectively during these challenging times. By focusing on customer value, proactive support, operational resilience, and fraud prevention, insurers can meet regulatory expectations and maintain trust among their customers. The industry is encouraged to remain adaptive and customer-focused to navigate the economic challenges effectively, ensuring both compliance and high standards of customer care.

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