Dear CEO | Release Date: 20th September 2023
To read a longer summary of this Dear CEO letter, click here.
To access the original FCA document, click here.
Short Summary
The Financial Conduct Authority (FCA) has detailed its strategic objectives and priorities for the UK insurance market from 2023 to 2025, addressing the key sectors of personal and commercial lines, wholesale, and life insurance. The market’s importance to both the UK and global economy is underscored by its extensive service range and significant financial contributions, including £55 billion in Gross Written Premiums from the wholesale market alone in 2021, and life insurers managing approximately £2.35 trillion across 90 million policies.
The FCA highlights ongoing challenges such as the aftereffects of COVID-19, economic pressures due to inflation, and the evolving risks from climate change and technological advancements. The strategic aim is to ensure the insurance market supports long-term financial stability and provides robust support during crises, with a focus on quick and fair claim resolutions.
Significant concerns include issues like the undervaluation of claims, discriminatory pricing, and inadequate handling of business interruption claims. The FCA criticises the industry for its frequent regulatory failings and underscores the necessity of firm governance to ensure consumer protection and market integrity.
Key priorities for the upcoming years include enhancing operational resilience, implementing the Consumer Duty to ensure products and services meet consumers’ needs, and addressing governance and cultural failings within the industry. The FCA intends to use a range of regulatory tools to enforce these standards, including mystery shopping and direct engagement with firms’ boards.
The letter calls for insurance firms to proactively align their operations with these regulatory expectations to improve consumer outcomes and market function. Firms are urged to take concrete actions rather than seeing compliance as a checkbox exercise. This includes a strategic focus on operational resilience, consumer-centric practices, and addressing both financial and non-financial misconduct within the industry.