Dear Board of Directors | Release Date: 25th August 2021
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 Financial Conduct Authority (FCA) has communicated its supervisory strategy for Personal and Commercial line (PL&CL) insurers, highlighting ongoing risks and setting out expectations for mitigating these risks. The FCA emphasises the significant challenges faced by the sector, particularly from the COVID-19 pandemic, which has underscored the necessity for firms to maintain robust governance and operational controls. The letter identifies areas requiring attention, including the implementation of regulatory changes, management of business model evolution, and ensuring fair customer outcomes during insurance claim processes, notably in Business Interruption (BI) cases.
Firms are expected to handle BI claims swiftly and fairly, in accordance with recent court judgments and FCA guidance. The letter also stresses the importance of operational resilience, especially in managing customer data and system integrity, which has become crucial in the remote working environment induced by the pandemic.
Moreover, the FCA outlines its focus on pricing practices, expecting firms to avoid excessive charges and ensure that pricing strategies are fair and transparent. This follows findings that some firms’ pricing practices have disadvantaged certain consumer groups. Firms are urged to ensure products offer fair value and are governed by adequate oversight to prevent consumer harm.
Key takeaway:
Insurers should rigorously assess their practices to align with FCA expectations, particularly in governance, pricing, and claims handling. The FCA will actively supervise compliance and intervene where necessary, using its full range of regulatory tools to enforce standards and protect consumer interests. Firms must stay informed on regulatory updates and maintain readiness to implement required changes effectively.