SMCR Round Up
The FCA has now published its final rules for the Senior Managers & Certification Regime (SMCR) in Policy Statement PS19/20. These reflect the changes proposed in Consultation Paper CP19/4 (Optimising the SMCR) but for most firms these do not materially affect the near-final rules which were published in July 2018
The FCA has also released a suite of checklists on its website to help firms implement the SMCR.
HMRC considers making broker fees subject to IPT
HMRC is currently evaluating feedback to a recent consultation on the operation of IPT, including whether it should be applied to broker fees. HMRC recognises a trend for broker remuneration moving from commission received from insurers to administration and arrangement fees charged directly to customers (or a combination of both). HMRC will issue a framework for implementation of any proposed changes in due course.
FCA issues draft guidance for fair treatment of vulnerable customers
The FCA has published Guidance Consultation (GC19/3) which sets out what the regulator expects of firms in ensuring that vulnerable customers are treated fairly and consistently. The closing date for feedback is 4 October 2019, after which the FCA intends to consult on revised draft guidance and, if necessary, consult on new rules.
FCA proposes travel insurance ‘signposting’ service
The FCA has issued a Consultation Paper (CP19/23) which proposes that consumers with pre-existing medical conditions (PEMCs), which result in cover being declined, restricted or subjected to a premium loading, are signposted to a directory of travel insurance firms specialising in impaired lives. The directory would be hosted on the website of the Money and Pensions Service. The consultation, which takes into account feedback from the regulator’s previous Call for Input and Feedback Statement on access to travel insurance for consumers with PEMCs, closes on 15 September 2019.
FCA consults on assessing adequate financial resources
The FCA has issued Consultation Paper CP19/20 which aims to provide more clarity on the role that having adequate financial resources plays in minimising harm to customers and the integrity of the UK financial system. The paper also sets out the regulator’s approach to the assessment of adequate financial resources and factors firms can take into account when assessing the adequacy of their own resources. The deadline for responses is 13 September 2019, with a Policy Statement expected in late 2019.
EIOPA calls for establishment of network of national insurance guarantee schemes (IGSs)
The European Insurance and Occupational Pensions Authority (EIOPA) is of the view that all EU countries should have a national IGS to protect policyholders. In the event that an insurer becomes insolvent, the IGS would pay a minimum level of compensation to policyholders for their losses and/or ensure the continuation of insurance policies. To this end, EIOPA proposes that while the home country principle will apply, there should also be cross-border cooperation and coordination on this matter. Common funding arrangements and disclosure requirements have also been included in the draft advice, which is open for feedback until 18 October 2019.
New approach to third party oversight announced by Lloyd’s
With the publication of Market Bulletin Y5233, Lloyd’s has announced changes which will come into force in early 2020. Revised processes will apply to the approval of delegated authority applications and approval and oversight of delegated claims administrators, as well as a more flexible approach to grants of delegated authority and sub-delegation of authority.
FOS consults on funding changes post-PPI
With the August 2019 PPI complaints deadline in sight and a substantial fall in the number of new complaints expected, the Financial Ombudsman Service (FOS) is now consulting on future funding arrangements. Proposals include rebalancing the proportion of income generated by the FOS levy compared with case fees, thereby reducing the number of ‘free’ cases. Whilst the FOS anticipates a need to downsize, it warns that complaints are likely to become increasingly complex.The consultation period ends on 13 August 2019, with ‘strategic plans and budget consultation for 2020/21’ to follow in December 2019.
The National Cyber Security Centre (NCSC) has published what it refers to as a ‘quick and easy’ guide on how small businesses can implement a 5-stage plan to significantly reduce the risk that they will fall victim to cyber crime.
FCA publishes 2018/19 anti-money laundering report
The FCA’s most recent annual report on anti-money laundering begins with a clear statement that the regulator is striving to make the UK’s financial sector ‘a tough target’ for criminals. Later in the report, the regulator reminds readers that it has taken enforcement action against four wholesale insurance intermediaries since 2009 for failure to adequately manage corruption risk within their businesses.
FCA issues Notice of Undertaking about ‘contradictory’ policy wording
A recent case involving ETA Services Ltd highlights how the FCA can use its powers to enforce the Consumer Rights Act 2015. In this instance, the regulator considered there to be contradictory clauses on cover provided under a consumer insurance policy.
FCA publishes policy statement for regulated fees and levies 2019/20
Policy statement PS19/9 confirms the FCA’s regulatory fee structure and rates for the 2019/20 year. The publication includes a link to the FCA’s online fees calculator which firms can use to calculate their individual fee invoices, to be issued later this summer.
FCA Register criticised by Complaints Commissioner
The FCA has responded to criticism of its Financial Services Register in the Complaints Commissioner Annual Report 2018/19 by acknowledging that it needs improvement in a number of areas. The regulator hasstarted a comprehensive programme of work designed to improve the interface and provide more accurate information, including adata cleanse project which requires firms to confirm annually that their data has been checked. A new date stamp will show Register users the last time a firm’s details were updated or the date of the firm’s last confirmation statement.
FCA looks to replace GABRIEL
The FCA has announced that it intends toimplement a new system for the periodic submission of regulatory returns, with a view to making the process more efficient for firms, as well as facilitating easier system development, as the regulator’s needs change. Work is currently at an early, investigative stage and firms are invited to participate in a short online survey about their experiences of the existing GABRIEL platform. The FCA plans to publish feedback on the survey later this year.
‘Fair pricing’ round-up
The FCA has issued Feedback Statement FS19/4 which collates replies to its October 2018 Discussion Paper on fair pricing in financial services retail markets. The regulator considers that while fair pricing is an issue relevant to all consumers, it may be more likely to intervene if pricing practices result in harm to vulnerable consumers. The FCA stated that it will incorporate its work on fair pricing into the review of its principles, for which a discussion paper is expected in Q1 of 2020.
The Secretary of State for Business, Energy & Industrial Strategy has written to the Competition and Markets Authority (CMA) commending it for its work to stamp out harm but says that ‘bolder use of existing enforcement and regulatory powers are needed’. Government suggests that if existing powers fail to deliver required outcomes, it will consider further legislative or regulatory change.
Following the government’s letter of support, the CMA has issued a statement summarising the progress made following its investigation, warning that ‘There must be continued commitment to do more to tackle the loyalty penalty and take bold action to intervene.’
The Financial Services Consumer Panel (FSCP) has carried out its own research into the harm caused to consumers who are trapped in poorly-performing financial services products. In order to counter risk of harm, FSCP has asked the FCA to consider the merits of introducing a new ‘automatic upgrade’ rule. This would require a firm to either automatically upgrade its customers into its best available product or offer a choice of better quality and better value products from the range available to it.
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