The latest from the IUA, as the FCA tweaks the existing Consumer Duty rules;
Proposed changes to the scope of Consumer Duty rules applied to insurers have been welcomed by the International Underwriting Association. The trade body, however, has questioned whether its members will be able to fully benefit from reforms set out by the Financial Conduct Authority (FCA).
For several years the insurance industry has argued that the FCA’s rules should not apply to non-UK business and a decision to limit the international scope of the Consumer Duty regulations is a positive development. It will put London insurers on a level playing field with companies outside the UK. IUA members will be able to apply local regulation where their products are distributed, rather than having to accommodate both detailed FCA rules and local rules.
Proposals set out by the FCA in Consultation Paper 26/23 also clarify important proportionality measures for the Consumer Duty. Unfortunately, it is not clear the extent to which this will benefit IUA members as there has not been a similar change to insurance specific product governance rules.
The main benefit to insurers would have been to allow them to rely upon the work of others in the distribution chain, such as managing general agents and brokers who are often best placed to carry out fair value assessments.
Chris Jones, Chief Executive of the IUA, said: “The consultation proposals are overall a positive step forward. A move to restrict the international scope of the rules is welcome. If it is supported by a proportionate, and practical approach to implementation, it will boost UK insurers’ competitiveness in our most important markets.
“We would, however, very much like to explore further rationalisation of insurance specific rules on product governance. This would reduce duplication of effort by different parties in the insurance distribution chain by allocating accountability according to the activities each firm performs in line with Consumer Duty.”
In responding to FCA’s consultation exercise, the IUA also argued against a proposal to remove remuneration disclosure obligations.
“Requiring all parties to disclose the payment being received is the best way of ensuring transparency to the end customer, added Mr Jones. “Reducing transparency could disadvantage customers and encourage undisclosed commission or fee arrangements.”
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