Compliance Newsletter – April 2017

FCA issues its 2017/18 Business Plan
The FCA has published its 2017/18 Business Plan which, for the insurance sector, includes a shift in some of its focus from issues directly affecting individual and SME insurance buyers to market structures, incentives and distribution. It outlines what it sees as key regulatory issues for the general insurance sector and states that it will begin ‘discovery work’ in a number of areas, including:

  • ‘Value in the distribution chain’;
  • A Market Study on the wholesale insurance market;
  • Firms’ pricing practices;
  • Resilience of firms’ IT systems.

The Business Plan also confirms the regulator’s planned move from its present offices in Canary Wharf to the International Quarter in Stratford (East London) in 2018.

For more information, click here.

FCA consults on the implementation of the IDD
The FCA has published CP17/7 which is the first of two consultation papers proposing rule updates required as a consequence of the Insurance Distribution Directive (IDD) coming into effect in the UK on 23 February 2018. The proposed changes include the introduction of a mandatory CPD requirement for all GI staff, various changes to ICOBS rules and the creation of a new regulatory regime for intermediaries whose main business is not insurance.

The deadline for responses to the FCA’s consultation is 5 June 2017 and the new rules are expected to be finalised by September 2017.

For more information, click here.

The FCA’s second consultation paper, which will cover its approach to the implementation of the new Insurance Product Information Document (IPID), the conduct of business requirements for life business and insurance-based investment products (IBIPs), product oversight and governance, passporting and sanctions, is expected to be published later in 2017.

EIOPA produces draft Insurance Product Information Document (IPID) template
Under the IDD, manufacturers of insurance products will be required to provide consumers with a standard set of information for a policy, similar to a policy summary, prior to sale. The European Insurance and Occupational Pensions Authority (EIOPA) has drafted a suggested template which is designed to help consumers make more informed decisions.

To download a copy of the draft IPID template, click here.

FCA researches fee-charging practices
In its March 2017 ‘Regulation round-up’ publication, the FCA reported on research it had conducted with a number of insurers and intermediaries on fee-charging, with a particular focus on motor insurance providers. The regulator found a number of poor practices, including a lack of clarity on the fees charged (particularly with on-line sales) and significant variations in fees charged for the same activity. It also saw instances of consumers having to pay policy cancellation fees to both the insurer and the intermediary which, when taken together, had the potential to be unreasonably high.

As a consequence of its research, the FCA has reminded firms that they must communicate their fees and charges in a way which is clear, fair and not misleading, and ensure that the terms in their consumer contracts are fair and transparent, as required by the Consumer Rights Act 2015.

For more information, click here.

FCA ‘Sector Views 2017’
The FCA has, for the first time, published a document summarising the data, trends and issues in each of the financial sectors that it regulates. General Insurance and Protection forms the largest section of the document, which gives a good insight to the reasoning behind some of the market studies and reviews the regulator has announced it will be undertaking over the next twelve months.

For further details, click here.

FCA consults on regulatory fees for 2017/18
The FCA has published Consultation Paper CP17/12 which shows an annual funding requirement for 2017/18 of £526.9m, a 1.5% increase on the previous year. It proposes that the increase will be evenly distributed amongst fee-payers in most cases. The consultation also includes proposals for the Financial Ombudsman Service.

The FCA’s on-line Fees Calculator is now available for firms to calculate their periodic fees for 2017/18 based on the proposed new rates. The finalised rates will be confirmed by the end of Q2 or shortly thereafter.

For more information, click here.

FCA updates and clarifies its definition of ‘durable medium’
The FCA has published a new page on its website to clarify the meaning of ‘durable medium’ when firms use non-paper methods of communication. The regulator also recognises that the definition in its Handbook Glossary is out of date and has proposed changes to this which are to be found in its Consultation Paper CP17/7 on the IDD.

For further details, click here.

Insurance industry raises concerns on GDPR
The Lloyd’s Market Association (LMA) issued a press release on 31 March 2017 as an insurance industry response to the Information Commissioner’s Office (ICO) guidance on how firms should obtain explicit consent from policyholders to process sensitive personal data (e.g. medical conditions declared for travel and healthcare insurance). The concern is that under the General Data Protection Regulation (GDPR), which comes into effect in May 2018, there is no specific provision for the insurance industry to be able to process sensitive personal data.

For more information, click here.

FCA publishes first set of complaints data under the new rules
The FCA has published data on the number of complaints reported by firms since its new rules came into force on 30 June 2016. The total for the second half of 2016 was 3.04 million, which in absolute terms is higher than previous reporting periods because under the new rules all regulated complaints (including those resolved in one to three working days) are now reportable. However the FCA estimates that in real terms the total number of complaints actually decreased by approximately 14%, taking into account that complaints resolved by the end of the next working day did not previously get reported.

Payment protection insurance (PPI) remains the most complained-about product, at 895,000. Other General Insurance and Pure Protection complaints totalled around 665,000.

For more information, click here.

LMA issues V3.0 of its Consumer Wordings Guidance
The Lloyd’s Market Association has reissued its Consumer Wordings Guidance to reflect further legislative and regulatory developments since the last version was issued in November 2016. This includes the requirements of the new consumer insurance renewal disclosure rules that came into effect on 1 April 2017.

For more information, click here.

FCA delivers speech on Cyber Security
In a speech recently delivered at the Financial Information Security Network, a director of the FCA has revealed an increasing trend for regulated firms to report that they had suffered a cyber attack (5 in 2014, 27 in 2015 and 89 in 2016). The speaker urged firms and their staff to move towards a ‘secure culture’, adding that simply ‘getting the basics right’ could prevent 85% of cyber security breaches.

To see the text of the FCA’s speech, click here.

Irish regulator takes stand on branding of consumer policy documents
A regulatory communication recently issued by Lloyd’s reveals that the Irish regulator, the Central Bank of Ireland (CBI), has introduced new restrictions on the issuance of policy documents for consumers by intermediaries.

The CBI has advised insurers that, where a contract for a consumer located in Ireland is issued by an insurance intermediary on behalf of the insurer, the CBI does not permit the document to contain any reference to, or any branding connected with, the insurance intermediary but only that of the insurer. This requirement is effective immediately and applies regardless of the location of the insurance intermediary.

For more information, click here.

The science behind misleading adverts
The FCA has published an ‘Insight’ article on its website which explains three ways that behavioural science can help to spot a misleading advert. It has also issued Occasional Paper No 26 which explores the science of financial advertising, focusing on how consumers see, interpret and act on information in advertisements. The Paper considers situations where consumers may find it harder to understand and where there is the potential to be misled.

For more information, click here.

FOS publicises its plans for 2017/18
Following stakeholder feedback about its proposed plans and budget for 2017/2018 (which included responses from businesses, trade bodies and consumer representatives) the Financial Ombudsman Service (FOS) has finalised its plans for the year ahead. These include a target of resolving half of all complaints referred to the organisation within 45 days. The FOS has also confirmed that the ‘free case allowance’ of 25 cases per firm per year remains unchanged.

For more information, click here.

BREXIT: PRA issues a ‘Dear CEO’ letter to insurers
The PRA has issued a ‘Dear CEO’ letter to insurers and reinsurers undertaking cross-border activities between the UK and the rest of the EU. The communication was sent to ensure that all affected (re)insurers are planning appropriately for the full range of possible scenarios arising from the UK’s withdrawal from the EU.

For more information, click here.

ELTO Broker’s Guide
The Employers’ Liability Tracing Office (ELTO) has updated its guidance for managing general agents and brokers with delegated authority. The guidance includes a checklist which is designed to assist firms with the collection of information on employers’ liability insurance.

For more information, click here

The information provided in this Newsletter is based on the Managing General Agents’ Association’s knowledge and understanding of regulatory issues at the date of publication. However, it is generic in content, and matters in UK regulation change regularly. Members should take their own professional advice in connection with any issues which could affect their business. The Managing General Agents’ Association accepts no responsibility or liability for any actions taken based on the information contained within this Newsletter.

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