Compliance Newsletter – March 2020

Regulators respond to the Covid-19 pandemic
The FCA has published a web page outlining its expectations of firms in the insurance sector at a time when it anticipates that many customers will find themselves to be in a vulnerable position. As well as expecting firms to have robust systems and controls, the regulator addresses potential issues consumers may now be facing with travel, motor, household and private medical insurance in particular. It also considers the position on renewals and mid-term adjustments in general, as well as situations where firms decide to suspend some product offerings.
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The FCA has reminded firms that its rules give them the ability to consider their arrangements according to customers’ circumstances. It welcomes firms reviewing their current arrangements to address the evolving situation, while managing the risks to their employees, customers and the impact on the market. The regulator further states that it expects to adapt its guidance to firms as the coronavirus situation develops.

A number of delays to FCA publications have been announced. Among the publications now to be delayed to 1 October 2020 are guidance on vulnerable customers and the FCA’s final report on GI pricing practices, along with a consultation on its proposed remedies.
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The FCA has requested that firms identify whether they have any key workers with school-age children who may need toutilise the services schools are providing to children of such workers, if they need them.
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The FCA has published a web page for consumers, which explains how coronavirus could impact their insurances whilst at the same time reminding them that they can expect to be treated fairly by firms. It makes particular reference to travel, motor and home insurance, and premium finance arrangements.
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The Bank of England (BoE) and the Prudential Regulatory Authority (PRA) have announced a number of measures aimed at alleviating operational burdens on firms, with mention of the PRA reviewing its approach for considering and processing Senior Manager applications.
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The Financial Reporting Council (FRC) has issued updated guidance for auditors on how their approach to financial audits and preparing accounts may have to change as a result of the coronavirus. This includes the adequacy of disclosures made by management about the impact of Covid-19 on the firm.
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FCA publishes Sector Views 2020
The Sector Views publication gives the FCA’s overall view of how each financial sector is performing based on the data available as at mid-2019. For the general insurance sector, the regulator highlights a number of potential sources of customer harm, including the ‘loyalty penalty’, complex distribution chains, consumers with specific needs and non-financial misconduct.
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FCA shares cyber insights
With cyber risk continuing to be an ever-evolving and complex challenge for the financial sector, the FCA has shared insights from Cyber Coordination Groups (formed of 175 firms across the financial services industry) consisting of four themes: cyber risks, identity and access management, third parties and supply chain, and malicious emails.
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The FCA has also published a podcast entitled ‘What does cyber security and resilience mean for firms?’ which discusses what all firms can do to protect themselves from cyber attacks.
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FCA publishes final rules for travel insurance signposting
The FCA is introducing new signposting rules and guidancedesigned to help consumers with pre-existing medical conditions get better travel insurance outcomes. The provisions include the creation of a publicly available directory of specialist providers by Summer 2020. Firms selling travel cover will be required to include details of the directory on their website, and the FCA expects firms to have implemented its other requirements by 5 November 2020.
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FOS round-up
FOS has highlighted the problems consumers can face when they find they are not fully insured for what they need, or where they misrepresent their circumstances when applying for cover. It has published a report on underinsurance, misrepresentation and non-disclosure, which also illustrates how the provisions set out under the Consumer Insurance (Disclosure and Representations) Act 2012 are not always being utilised.
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FOS has published its latest quarterly product complaints data. PPI continued to be the most complained-about product, making up nearly half of all complaints received, followed by consumer credit complaints.
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On 1 April 2020the award limit increases from £350,000 to £355,000 for complaints referred to FOS about acts or omissions which occurred on or after 1 April 2019. The FOS award limit is now increased annually for inflation, according to the Consumer Prices Index.
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Courts round-up
In the first case to be decided under the Insurance Act 2015
, the Court of Session found that a company director’s failure to disclose his directorships of four insolvent companies prior to a £7.2m fire claim amounted to failure of duty to make a fair presentation. It also found that his assertion that the insurer had waived disclosure under the Act was unfounded.
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A Commercial Court judge found in favour of an insurer which asserted that had it known about a policyholder’s attitude to risk management, it would not have extended its policy to cover new machinery, which was subsequently destroyed in a fire.
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FCA issues warning letter on credit broking risks
The FCA has issued a ‘Dear Director’ letter to firms which undertake credit broking, setting out its view of the key risks credit brokers could pose to their customers or to markets, with an emphasis on pre-empting potential harm.
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Brexit round-up
The FCA
 has reiterated that during the Brexitimplementation period, (i.e. until 31 December 2020), EU law will continue to apply, with firms continuing to benefit from passporting between the UK and EEA. It also states that although the window for the Temporary Permissions Regime (TPR) closed on 30 January 2020, it intends to re-open it later this year.
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Lloyd’s has issued a Market Bulletin (Y5278) outlining the impact that the UK’s withdrawal from the EU will have on Lloyd’s insurance contracts, and confirms the relevant measures Lloyd’s has put in place.
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The PRA has issued a letter to insurers regarding their contingency plans to ensure ongoing service continuity in respect of their EU liabilities once the transitional period has ended.
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Lloyd’s updates its MRC guidance
Following an annual review of the Market Reform Contract (Open Market) Guidance, the Lloyd’s Market Association (LMA) has published a new version (v 2.0) of its Guidance.The revised Guidance can be used immediately but will become the required standard for new and renewal business from 1 June 2020.
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Treasury respondsto call for evidence on regulatory coordination
HM Treasury has published a document which includes information on how the financial services regulators, working with government, propose to improve regulatory coordination.
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CII launches new Chartered title
The Chartered Insurance Institute (CII) has launched a new Chartered Insurance Underwriting Agents title for individuals working in the Managing General Agents (MGA) sector, together with a corporate version of the title which is available for firms which meet the criteria.
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FCA publishes discussion paper on driving purposeful cultures
The FCA has published a set of essays presenting a range of views from industry leaders, professional bodies and culture experts to help firms embed purposeful cultures within their businesses.
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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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