FCA publish thematic review on GI distribution chain

The FCA has published its thematic review on the general insurance distribution chain.  This includes a call to action on firms to ensure that they address the issues identified and bring the recommendations  to front and centre on firms’ governance agendas.

The review has identified that the length of some distribution chains create two risks:

  • the number of parties involved inflate the price (and therefore the value ) of some GI products
  • the complex chains negatively affects the service delivery and customer experience/outcomes

Potential harm faced by many customers in the GI sector has also been identified:

  • purchasing products with little benefit or that are not appropriate
  • increased costs for products
  • lack of remedial action where firms have identified no value products

The main cause of these harms are:

  • firms’ business models and strategy not focusing on customer outcomes
  • firms’ poor governance and oversight over the customer journeys and products

As a result the FCA has confirmed that it requires all firms to put customers at the heart of their business models.  This means they expect all GI firms to:

  • act fairly, honestly and professionally and in the best interests of customers
  • place customer value as a key consideration
  • maintain proper systems and controls over the products and services and over remuneration of the firm
  • understand roles and remuneration of all entities in the distribution chain to ensure it doesn’t impact on customer value
  • consider the impact of their distribution strategy on customer value

This call to action is one of a number of communications and supervisory work the FCA is planning for the GI sector to bring focus to these issues.  The first of these is the FCA’s Dear CEO letter  and its guidance consultation  also published today which invites responses on the proposed guidance and is open until 9 July 2019.






Emma Radmore