The FCA recently published its priorities for 2023-2025. The sub-text of the Dear CEO letter, which pushes Boards to take real, concrete action to deliver good customer outcomes, aligns with our view that not enough is being done across some quarters of the insurance market to adhere to recent regulatory changes. In this article, we lay out our market-wide view of key areas that Boards should focus upon to ensure firms are truly living up to the standards that the FCA expects of them.
Blending our deep technical and regulatory expertise in insurance, we use our Conduct Risk Playbook to help firms better understand and practically respond to both weaknesses as well as opportunities to achieve and demonstrate compliance whilst creating commercial value.
As well as communicating its priorities for the insurance market during 2023-2025, last week’s Dear CEO letter also includes information on the specific risks of harm that the FCA is most concerned about and what it wants firms to do in response.
A crucial message conveyed by the letter is the FCA’s belief that whilst many Boards are well intentioned in terms of their responsibility to ensure good outcomes for customers, not enough progress is being made to deliver these. The FCA stresses its expectation that Boards across the market are ensuring “concrete, proactive action” is taking place across their firms to genuinely facilitate good customer outcomes. The FCA is clear in saying that Boards should not view this as a compliance exercise or indeed wait for the FCA itself to force action.
Whilst the vast majority of (re)insurers, MGAs and brokers no-doubt hold the belief that they place good customer outcomes at the heart of their businesses, the FCA’s concerns align with our view that many are still missing crucial opportunities to both enhance the quality of customer outcomes and clearly align with the relatively recent step-change in regulatory requirements. Examples of areas of weakness that we have observed across the market which are creating challenges for firms in being able meet the FCA’s expectations include:
Aligning with the sub-text of the FCA’s letter, we are of the view that there is a real risk that Boards and senior management teams are over-optimistic in the belief that their strategies, execution and evidence are in effective alignment with the enhanced regulatory landscape. This reality may only become apparent upon the FCA’s review of information and other data-led submissions, or via their direct own questioning of a firm’s individual senior managers (or those of their distributors and any appointed representatives).
It is therefore important that a firm’s leadership is able to clearly identify and articulate the broad range of evidence that it has to robustly demonstrate alignment with the FCA’s expectations. Where a firm is unable to do so, these should become priority areas of focus for remediation.
With the FCA now shifting its focus to confirming the adequacy of firms’ approaches to the myriad of recent conduct focussed regulatory change, (re)insurers, MGAs and brokers can expect an increase in the frequency of data requests which will be used to help identify outliers across the market. Boards and senior management teams should therefore look to use all appropriate internal and external mechanisms to obtain their own assurance.
Given the wide-ranging nature of changes to the regulatory landscape and the move away from traditional prescriptive articulations of rules, we believe there is real value on offer by seeking insight from partners who can provide a wider-lens view of how a firm’s approach compares with external perspectives such as:
Using our Conduct Risk Playbook, we support Boards and senior management teams to gain a clear understanding of how well their firms’ strategies, plans, execution and evidence align with our view of the FCA’s requirements and also good market practice.
Blending our unparalleled knowledge and experience in insurance across core technical domains, we use our Conduct Risk Playbook to help firms better understand and practically respond to both weaknesses as well as opportunities to achieve and demonstrate compliance whilst creating commercial value.
Our unrivalled technical expertise and experience within the insurance arena means we have an unparalleled ability to help clients across key disciplines such as pricing, product, claims, underwriting and governance.
Given our specialist focus on the insurance market, we occupy a unique position in terms of our capability to provide truly wide-lens insights into evolving market strategies, products and practices.
Whether through the use of new technologies and evolved methods, developing enhanced products or creating more insightful perspectives, our ways of working and solutions are rooted in being practical, efficient and unlocking real value for our clients.