Compliance Newsletter – September 2018

Due diligence on insurers in the spotlight
The FCA has published a new page on its website, setting out its expectations of brokers in choosing which insurers they place business with. It also pledges to do further work in this area to verify that insurance brokers are conducting appropriate due diligence on the insurers they use.  FIND OUT MORE

The European Insurance and Occupational Pensions Authority (EIOPA) has issued a report entitled ‘Failures and near misses in insurance: Overview of the causes and early identification’ which is intended to enhance the sector’s understanding of the financial failure of insurers. The report uses data from EIOPA’s database of insurer failures and near misses between 1999 and 2016.  FIND OUT MORE

EIOPA publishes first set of Q&As on the IDD
EIOPA has published a set of Q&As providing practical guidance on the application of the Product Oversight & Governance (POG) Regulation under the Insurance Distribution Directive (IDD). Further Q&As on other IDD-related topics are expected to be published by EIOPA in due course.  FIND OUT MORE

FCA multi-firm review of complaints handling
The FCA has published findings from its review of how firms handle complaints and what lessons can be learned, including complaints recognition and recording, and improving a firm’s root cause analysis (RCA). Although the review was in conducted in the mortgage sector, the regulator has stated that the principles are relevant to all authorised firms.  FIND OUT MORE

The FCA has also published a non-sector-specific ‘Understanding complaints root cause analysis’ hypothetical case study, which is designed to help firms to distinguish between a symptom and the root cause of a complaint, and to show what a complaints RCA looks like.  FIND OUT MORE

EIOPA launches travel insurance thematic review
EIOPA has launched a thematic review on consumer protection issues in travel insurance arising from the design, distribution and sale of such products across the European Union. Sales of travel insurance as an ancillary product (e.g. through travel agents) will be given special attention.  FIND OUT MORE

FCA produces SM&CR guidance video
The FCA has published a short (six-minute) video overview to explain the rules and the principles of the Senior Managers & Certification Regime (SM&CR) which comes into effect for insurance intermediaries on 9 December 2019.  FIND OUT MORE

New rules for consumer credit lenders
From 1 November 2018 new rules, as set out in Policy Statement PS18/19 (‘Assessing creditworthiness in consumer credit’), will apply to lenders. These are designed to clarify what is considered proportionate when assessing creditworthiness, and the FCA’s expectations around firms’ policies and procedures.

Alongside the Policy Statement, the FCA has written a ‘Dear CEO’ letter to premium finance lenders expressing its concern that that some firms are not complying with its creditworthiness rules, including those relating to affordability assessments. The letter also reminds the lenders to take reasonable steps to ensure other firms acting on its behalf, including credit brokers, are complying with its CONC rules in the FCA Handbook.  FIND OUT MORE

LMA round-up
The Lloyd’s Market Association (LMA), in conjunction with the Wordings Forum, has prepared model IPIDs for four of the five consumer products for which it already has model wordings (including home and personal accident insurance).  FIND OUT MORE

The LMA has published Version 1.9 of its Market Reform Contract (MRC) Guidance following an annual review. The start date is 1 January 2019, but it can be used immediately. Also, as a result of the establishment of Lloyd’s Brussels, an addendum (V1.0) to the MRC has been produced.  FIND OUT MORE

The LMA, in conjunction with the IUA, LIIBA and BIBA, has published an interactive London Insurance Market Core Uses Information Notice designed to help market participants with their General Data Protection Regulation (GDPR) compliance.  FIND OUT MORE

FCA to consult on the reporting of GI value measures
Following the second set of data in its general insurance value measures pilot, published in March 2018, the FCA has announced that it is collecting a third set of data covering claims frequency, claims acceptance rates and average claims payout for certain consumer insurance products. It intends to publish the data in early 2019 as well as issuing a Consultation Paper on the future reporting of GI value measures.  FIND OUT MORE

Brokers’ duty to elicit material information from clients clarified by court
A recent High Court case (Avondale Exhibitions Ltd v Arthur J Gallagher Insurance Brokers Ltd) is being regarded as a useful clarification of the extent of the duty of a broker to elicit material information from its client, to ensure that insurance cover would not subsequently be avoided by the insurer due to non-disclosure.  FIND OUT MORE

FCA Mission: ‘Our approach to consumers’
The FCA has published the responses to its ‘Future Approach to Consumers’ consultation paper concerning its approach to regulating for retail consumers. The document sets out the FCA’s vision for well-functioning markets for consumers and the conditions it wants to see to achieve this. It also explains how it uses its powers and tools to protect consumers.

In the paper, the FCA confirms it has decided to revert to its original definition of vulnerability (given in Occasional Paper No 8) which defines a vulnerable consumer as: ‘someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care’.  FIND OUT MORE

FCA evaluates success of GAP insurance point-of-sale ban
The FCA has published Evaluation Paper 18/1 which considers the impact of its point-of-sale ban on guaranteed asset protection (GAP) insurance alongside car sales, which came into effect on 1 September 2015. The regulator concludes that its intervention has had a positive impact overall, doubling the number of consumers who shop around for cover. However, the sales of add-on GAP, and the price consumers pay for it, has fallen by less of a margin than it was expecting.  FIND OUT MORE

FCA decides not to change Principle 5
In Chapter 4 of its Policy Statement 18/18 (‘Industry Codes of Conduct and Feedback on FCA Principle 5’) the FCA summarises the feedback it received on the merits of extending the application of Principle 5 (‘a firm must observe proper standards of market conduct’) to the unregulated activities of authorised firms. It has decided not to proceed with taking this proposal forward to consultation at the current time, but states that it may revisit this decision in the future.  FIND OUT MORE

FCA issues interim report on the review of the retained provisions of the CCA
The FCA has issued an interim report setting out its initial views on whether the repeal of Consumer Credit Act (CCA) provisions would adversely affect consumer protection. Stakeholders are invited to comment by 2 November 2018.  FIND OUT MORE

BRexit round-up
The FCA has updated the EU withdrawal section of its website to help firms determine if and how they will be affected by BRexit, and what action they may need to take as a result.  FIND OUT MORE

The FCA has published details of its proposed temporary permissions and recognition regimes for EEA firms operating in the UK after BRexit. These would be engaged in the event that no implementation period is agreed between the UK and the EU and that passporting falls away on 30 March 2019. The new arrangements will allow inbound firms to continue operating in the UK within the scope of their current permissions for a limited period after exit day, while seeking full UK authorisation.  FIND OUT MORE

The European Commission is concerned that financial services firms will be insufficiently prepared for BRexit, whether or not a ‘deal’ is agreed with the UK. It has issued a communication calling on Member States and private parties to intensify preparedness at all levels and for all outcomes.  FIND OUT MORE

FCA Research Note on price discrimination
The FCA has published a short Research Note setting out a framework for considering the fairness aspects of consumers paying different prices for the same product. Whilst the FCA states that ‘price discrimination is not in itself an unfair practice’, it acknowledges that it can provoke strong views on how firms treat their customers, such as long-standing customers receiving a significantly worse deal than new customers.  FIND OUT MORE

FCA ‘Live & Local’ events for the remainder of 2018
The FCA is offering workshops across the UK for general insurance firms, with a focus on the Senior Managers and Certification Regime (SM&CR) and the Insurance Distribution Directive (IDD). It is also holding an ‘Ask the regulator’ roundtable discussion event in conjunction with an industry panel. Online registration is required for each event.  FIND OUT MORE

FCA improves its ‘Connect’ system
The FCA has provided Connect, its system for making regulatory applications and notifications, with new functionality and an updated user interface. This is intended to give greater visibility of applications, allow users to track their progress and facilitate the provision of helpful information.  FIND OUT MORE

Anti-money laundering round-up
HM Treasury has issued a money laundering advisory notice about money laundering and terrorist financing controls in higher-risk jurisdictions in response to two recent statements from the Financial Action Task Force (FATF). It replaces all previous advisory notices and advises on the approach to be taken with specific countries, for example due diligence or counter measures.  FIND OUT MORE

The Ministry of Justice (MoJ) has published a consultation paper aimed at cracking down on money laundering by strengthening the system for suspicious activity reporting (SAR). The MoJ said that the current system for SARs is not working as well as it should and that law enforcement agencies are struggling with a ‘significant number of low-quality reports’ which could mean that criminals are escaping detection. The consultation is open until 5 October 2018.  FIND OUT MORE

Lloyd’s round-up
An updated ‘Code for Underwriting Agents: UK Personal Lines Claims & Complaints Handling’ came into force on 1 August 2018. It introduces compliance charges of up to £25,000 for managing agents who fail to comply with the Code, and the maximum monetary value of any complaint upheld at ‘Stage 2’ by Lloyd’s that can be made binding on managing agents is increased from £500 to £50,000.  FIND OUT MORE

Lloyd’s has also released Version 5.1 of its Coverholder Reporting Standards which includes changes applicable to the UK and Lloyd’s Brussels, as well as updated premium and claims standards.  FIND OUT MORE

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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