Dear CEO/Director | Release Date: 3rd February 2023
To read a longer summary of this Dear CEO/Director letter, click here.
To access the original FCA document, click here.
Short Summary
The Financial Conduct Authority (FCA) has issued a directive to Life Insurance firms and their regulated outsourced service providers (OSPs) focusing on the implementation of the Consumer Duty. This new framework emphasises an outcomes-focused approach to consumer protection, mandating higher standards of care and emphasising customer outcomes as central to business strategies.
Key points from the directive include:
An outline of the implementation timeline with significant dates being the end of October 2022 for agreement of implementation plans, and the Duty coming into effect on 31 July 2023 for open products and services, and on 31 July 2024 for closed products.
The Duty applies not only to Life Insurance firms but also to OSPs that play a significant role in customer outcomes, indicating that both must comply with the regulatory requirements.
Specific focus is on enhancing digital capabilities, supporting decision-making throughout a customer’s financial life, and integrating customer interests deeply into corporate culture and operational strategies.
Firms are encouraged to review their current systems and controls rigorously to ensure compliance, particularly focusing on their interactions with OSPs, as these will form a significant part of future supervisory reviews. The directive also stresses the importance of firms being proactive in their engagement with OSPs to clearly define and meet the Duty’s requirements within the set timelines.
Key takeaways for firms include prioritising the integration of the Consumer Duty into their strategic planning, ensuring robust engagement with OSPs, and preparing for the FCA’s supervisory activities focused on this new standard. Affected firms should actively review and adapt their operational and compliance strategies to align with these heightened expectations for consumer protection.