Compliance Newsletter – January 2020

FCA warns intermediaries about non-financial misconduct

The FCA has sent a ‘Dear CEO’ letter to a number of insurance intermediaries stating that non-financial conduct failings including discrimination, harassment, victimisation and bullying, are indicative of a poor culture. These will be key areas of focus for the regulator in its supervision of all firms and the fitness and propriety of senior managers.

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FSCS levy set to rise

The Financial Services Compensation Scheme (FSCS) has indicated in its Plan and Budget 2020/21 that the levy for the general insurance distribution class will be almost doubling, from £12m in 2019/20 to £23m for the coming year. This is due to a surge in PPI claims brought about by the FCA’s complaints deadline of 29 August 2019. The final levy will be confirmed in April 2020.

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FCA fires warning shot to insurers about culture

The FCA has written to the boards of commercial and personal lines insurers warning that a step change is required to their culture, including prioritising their focus on conduct and consumer outcomes to avoid harm. The letter outlines the drivers of harm, including lack of oversight of distribution chains, the risk of consumers being provided with unsuitable products, poor pricing practices, ineffective management of regulatory change, and poor operational controls. The regulator states that it will be increasing its scrutiny of these issues over the course of 2020.

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CMA publishes ‘loyalty penalty’ update

The Competition and Markets Authority (CMA) has published an update a year on from its investigation into the so-called ‘loyalty penalty’, which followed a super-complaint from Citizens Advice. The CMA welcomes the findings of the FCA’s general insurance market study, issued in October 2019, acknowledging that the suggested remedies have the potential to address its concerns. The FCA’s final report is expected to be published in Q1 2020.

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FCA publishes its table of fines for 2019

The FCA fined individuals and firms a combined total of £392 million for the year ending 31 December 2019. Details of the circumstances leading to each fine is tabulated on the FCA’s website.

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New annual requirement to update or confirm Register data

All FCA-authorised firms are, from 31 January 2020, required to review and confirm the accuracy of their details on the Financial Services Register annually, within 60 days of their year end. This applies even if no changes are needed.

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FOS to change its case fee-charging structure

The Financial Ombudsman Service (FOS) is consulting on its plan, budget and future strategy for 2020/21, which includes a proposal to increase individual case fees from £550 to £650 and reduce the number of ‘free’ cases to 10 per year for each firm.

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PRA intervenes on Lloyd’s whistleblowing arrangements

Following a revelation that Lloyd’s whistleblowing process had not been fully operational since October 2017, the PRA has published a number of requirements to which the corporation has voluntarily agreed in respect of its whistleblowing systems and controls.

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Strengthening operational resilience

The Bank of England (BoE), Prudential Regulation Authority (PRA) and FCA have published a shared policy summary and co-ordinated consultation papers on new requirements to strengthen operational resilience in the financial services sector. Whilst not primarily aimed at insurance intermediaries, FCA Enhanced SMCR firms are within scope of the initiative. The deadline for responses is 3 April 2020.

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Brexit round-up

The FCA continues to update its Brexit-related web pages with information for firms and consumers, now including what will happen to financial services after 31 January 2020.

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Lloyd’s has issued a Market Bulletin (Y5278) to confirm the effect Brexit will have on Lloyd’s insurance contracts after 31 January 2020.

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‘Duty of Care’ Bill resurrected

This Bill, which was initially introduced in the House of Lords in late 2019 but had to be dropped due to the general election, has been re-introduced. It had its first reading on 9 January 2020 and, if eventually passed into law, would require the FCA to make rules for firms to owe a duty of care to consumers in their regulated activities.

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FCA Call for Input on Open Finance

The FCA has published a Call for Input ahead of discussions on the opportunities and risks from open finance. As increased use of data and technology is changing how financial markets work, the regulator wants to understand how open finance can develop to best meet consumers’ needs and improve competition. The deadline for feedback is 17 March 2020.

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ICO round-up

The Information Commissioner’s Office (ICO) has launched guidance consultation on the ‘right of access’ which explains the rights that individuals have to access their personal data and the obligations placed on data controllers. The consultation closes on 12 February 2020.

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The ICO is seeking feedback by 4 March 2020 on a draft code of practice for direct marketing, which it is required to issue under the Data Protection Act 2018. 

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Detailed guidance on ‘special category’ data, which discusses the extra safeguards and actions organisations must put in place to protect sensitive personal data, has also been published by the ICO.

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EIOPA publishes consumer trends report 2019

The European Insurance and Occupational Pensions Authority (EIOPA) has published its consumer trends report for 2019 which identifies concerns about cross-selling practices and high commissions in add-on insurances, and a high level of complaints in relation to motor insurance, primarily due to claims management issues.

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FCA updates its data strategy

The FCA states that it wants to be smarter in its use of data and advanced analytics to transform the way it regulates.

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BoE and FCA aiming to transform data collection from firms

The BoE and FCA are together investigating how technology could simplify the way firms report to their regulators. The closing date for responses to this initiative is 7 April 2020.

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FCA ‘Transforming Culture Conference 2020’

The FCA has announced its second Transforming Culture Conference, to take place in London on 25 March 2020. The regulator will share and discuss insights and ideas on topics important to culture transformation including psychological safety and the role that can be played by middle managers. The event is aimed at leaders who can drive role model cultural change within their organisations as well as individuals who can provide a perspective from outside the financial services industry.

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Financial Services AI Public Private Forum

The FCA and BoE consider artificial intelligence (AI) and use of machine learning (ML) as increasingly important fields of innovation in the financial services sector (including insurance). As a result, they have set up The Financial Services AI Public Private Forum to facilitate dialogue between stakeholders.

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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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