The Financial Conduct Authority (FCA) has fired a warning shot at the insurance industry today amid concerns firms are flouting its stringent consumer duty rules and failing to deliver value for customers.
In a review of the sector published this morning, the City watchdog said scores of insurers were still failing to deliver “good outcomes” for customers despite repeated warnings over the past year.
“Insurers need to make sure their customers are getting fair value. Progress is being made, but we are still seeing too many examples of insurers and brokers lacking the right information, governance, or oversight to ensure their customers get consistently good outcomes,” said Matt Brewis, director of insurance at the FCA.
“All insurance firms should take note of our findings and make improvements where appropriate,” he added.
In its review, the FCA said it had analysed 28 different insurance “manufacturers” and 39 distributors and was “disappointed” at the standard of governance protections in the industry.
“Many manufacturers are not adequately assessing and evidencing that their products deliver fair value and good outcomes,” the regulator added. “This means firms are not identifying any instances where their products are not delivering fair value for customers.”
The regulator has been tightening the screws on insurance firms over the past year after bringing in a stringent set of consumer rules in July last year.
Under the so-called consumer duty, companies within the FCA’s remit are now required to ensure they are deliver good outcomes for customers.
The insurance industry has been among a number to feel the pinch of regulators under the changes. Last September, the FCA wrote to all insurance firms reminding them of their requirement to provide “fair value to their customers”.
In February, the FCA struck an agreement with firms to pause the sale of so-called guaranteed asset protection (GAP) insurance due to concerns the products were not offering fair value.
GAP insurance is a type of insurance that can be added to a car loan or motor insurance policy.In May, it was confirmed that the FCA permitted several GAP insurers to recommence sales following changes to their products.