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ViewPoint – The FCA’s Policy Statement: Simplifying the Insurance Rules

The FCA has issued its long-anticipated Policy Statement on ‘Simplifying the insurance rules’ (PS25/21).  Richard Palmer, OneAdvent’s Head of Compliance and Risk shares his thoughts.

As expected, the main focus of the paper is around product governance, key takeaways including:

• A relaxation of the frequency with which products must be reviewed by manufacturers. The requirement of at least one review per year is replaced by an interval (to be determined by each manufacturer), based on its own assessment of the risk of the product’s potential for customer harm.
• The introduction of the option to nominate a ‘Lead Manufacturer’ for products. The FCA has confirmed that where there is a Lead Manufacturer, it must be an insurer rather than an MGA. This is despite strong lobbying from the MGA community to allow them to take on this role where they have been instrumental in the design of the product.  
• The definition of ‘Consumer’ has now been amended to exclude larger SMEs and will now follow the DISP rules to restrict ‘consumers’ to those who are eligible to complain to the FOS. The FCA states that it is still looking into further simplifying this classification, amid criticism from some in the London Market that the change does not go far enough.

But perhaps the most surprising development is the FCA’s decision to continue with its proposal to remove the 15-hour CPD (Continuing Professional Development) requirement introduced relatively recently (2018) under the IDD. This move was opposed by many in the industry, including some membership bodies, as it was felt that it may lead to a reduction in professional standards.

The FCA points out that firms are still required to ensure the competency and capability of staff but can now base their assessments on the quality of tailored training rather than a predetermined quantity of hours. It remains to be seen how firms will choose to adapt their training programmes in the light of this change. It can only be hoped those who successfully complained to the regulator that monitoring their employees’ CPD hours was too heavy an ‘administrative burden’ will not use the removal of the rule to allow professional standards to slip.

For more of Richard’s insight, why not take a look at his recent article: SM&CR Reform: Is Change Necessary?

Sophie

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