FCA tells insurers to do better on proving value and customer outcomes

The FCA has published a thematic review that looked at governance and oversight of insurance products. It has found that the industry has made progress in improving how products are designed, managed, reviewed and distributed but said it was “very disappointed” to note that firms still need to do more to show that products deliver fair value to customers and that customers are receiving good outcomes.

The review, focussed on firms’ obligations under PROD 4 involved 28 manufacturers and 39 distributors and covered 10 different general insurance and pure protection products.

Key findings include that:

• manufacturers often do not adequately assess and evidence that their products deliver fair value and good outcomes – which means that they are not identifying times when the products are not delivering;
• distributors often fail to understand their responsibilities to consider the impact of remuneration on value;
• insufficient MI means that firms cannot properly make assessments on fair value;
• some firms do not identify value problems even when it is clear that there is a problem;
• target market statements are often unclear and lack granularity;
• many manufacturers had not appropriately considered their distribution arrangements or choice of distributors;
• manufacturers often did not provide appropriate or timely information to distributors;
• distributors sometimes did not fully understand the target market; and
• distributors often lacked appropriate processes, for example on getting information from manufacturers or aligning their strategies to the manufacturers’.

The FCA wants manufacturers and distributors to review its report urgently, assess the extent to which the issues it raises apply to their activities and act promptly to take any remedial action needed, including redress to customers. It will be requiring attestations from senior management on actions taken and may require skilled persons reports. It is also looking at the best way to address the issues going forwards as well as giving feedback to firms involved in the review.