The FCA has published a discussion paper on the regulation of commercial and bespoke insurance business. It is seeking views on whether its current rules for commercial insurance products strike the right balance between safeguarding customers who need regulatory protections and making the commercial insurance markets competitive. It thinks it can potentially make some changes to align the balance.
The paper looks at:
- how the FCA rules apply to the commercial insurance market, in particular the point at which some rules are disapplied for particular customers and markets. The FCA has always distinguished between the needs of SMEs and larger commercial customers, and continues to feel that SMEs broadly need the same protections as consumers. In the insurance sector, the distinguishing factor for regulatory protections is often whether a contract is a large risks contract or not, and the FCA wants to consider whether that is still the most appropriate metric. It has been told that inconsistencies across existing definitions result in time-consuming and disproportionate effort in categorising customers, and leading to variances in protections that customers get, regardless of what they might need. It is therefore consulting on options for potentially
- replacing large risks with the DISP eligible complainant threshold;
- removing product-specific rules; or
- developing a new definition.
- the rules that apply where multiple firms are responsible for manufacturing insurance products. In this respect, it is interested in views not only in relation to commercial products but also on the impact in retail and pure protection contract markets. The paper seeks views on whether, in these cases, it should:
- designate responsibility to the lead insurer;
- allow co-manufacturers to determine responsibility for compliance; or
- provide clarificatory guidance on what the current rules require and from whom; and
- rules that apply to bespoke contracts. The FCA is considering broadening the scope of the “bespoke contract exclusion” and/or clarifying what “bespoke contracts” means
The FCA invites comments by 16 September. It will then consult on any changes it decides to make.