Dear Board of Directors | Release Date: 19th 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 updated its supervisory strategy for Life Insurers, extending the focus to include key third-party administrators. The letter outlines the progress since the 2018 strategy and reiterates the risks to consumers posed by life insurers. It highlights areas such as product governance, operational controls, and the management of funds, emphasising the need for firms to adapt and manage these risks effectively.
The FCA’s strategy targets specific issues including pricing practices, management of legacy products, and the effectiveness of consumer communications. It also focuses on operational resilience, particularly in the context of the challenges posed by the Covid-19 pandemic, which has tested the sector’s ability to operate under unprecedented conditions.
The strategy involves closely monitoring firms’ adherence to regulatory changes, ensuring that firms manage their business models adaptively to minimise consumer harm. Insurers are expected to ensure that their products continue to offer fair value and meet consumer needs, especially given the dynamic nature of the market and evolving consumer circumstances.
Key takeaway:
Life Insurers must rigorously assess their business practices and governance structures to ensure compliance with FCA regulations and to adequately protect consumer interests. The FCA will continue to supervise the sector actively, expecting firms to demonstrate robust management of risks and to effectively implement necessary regulatory changes. Insurers should remain vigilant, particularly in managing the impacts of Covid-19 and ensuring operational resilience.