Those FCA Rules Rollbacks: Comments From Capco

The chance for the industry to reset the FCA rulebook is a golden one, says Richard from Capco;

Richard Jackson, managing consultant at Capco, comments on the FCA’s plans to strip back insurance rules: “There will be a positive impact to the insurance industry from the steps announced by the FCA. The industry will likely welcome any de-duplication and simplification of the current rulebook, as this will address longstanding concerns raised previously from insurance firms about the length and complexity of the FCA’s rules and guidance. The regulator is seeking to recognise these concerns raised by the industry and hopes moves such as this will help to meet its strategic desires to both foster UK sector growth and become a smarter regulator.”

Status quo for now… but engage with the regulator

“At the moment, these regulatory changes are only proposals and may not come into force. For now, we suggest firms stick to their status quo. That means ensuring they have a robust product governance operating model, being clear about the roles and responsibilities of respective insurers when co-manufacturing products and continuing to organise and invest in suitable training and development programmes for their employees. Firms will all be at differing stages of maturity across all these aspects, so we encourage them to stick to their current plans while the proposals are consulted on over the remainder of the spring and early summer.

“The regulator has already said in its Consumer Duty feedback to the industry that it will utilise an accelerated consultation process to simplify its requirements where there is a clear case for change and stakeholder appetite to go quickly. It has signposted this will likely include a face-to-face event in summer 2025 and more clarity on action plans in September 2025, so firms should continue to engage proactively with the regulator over the next six months via its consultations, face-to-face sessions and regulatory speeches. Firms should then assess and, where appropriate, adjust their own action plans once the regulator announces its plans in September.”

Potential risks and unintended consequences

“There is an obvious risk that any loosening of product value checks could potentially heighten the risk of customer harm, so the industry’s input on the regulator’s proposals will be interesting. The FCA will leave firms to determine their own approaches based on their self-assessment of the risks posed by their products, which carries risk that a particular interpretation by a firm isn’t the correct call.

“Firms should utilise their Three Lines of Defence model to ensure they have a robust product governance operating model in place and that any relaxation of product checks stands up to internal scrutiny across the second and third lines. Relaxation of the frequency of periodic checks needs to be commensurate with the potential risk of harm posed to the intended target market, particularly if that target market is a firm’s retail customers and SMEs.”