FCA thematic review - product governance
The FCA have returned to the insurance sector with their latest thematic review TR24/2 , looking at the application of PROD requirements. Whilst the review is insurance-specific, there is very little here that is not directly applicable to any firm operating under the Product, Price and Value outcomes of Consumer Duty.
And it is very evident that there is a significant gap between what the FCA thinks good looks like, and how firms have approached the requirements. And the failings identified here can be found in firms across all retail sectors.
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Product Oversight & Governance (POG) arrangements
Ineffective governance is always a key driver of regulatory failings and poor outcomes. The FCA highlighted a range of issues in the report, including:
Clearly, none of those findings are unique to the insurance sector. And almost all firms will be able to see elements of their own approach in the points the FCA have raised.
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The following tables illustrate some of the regulator’s main concerns, and the actions firms should take to improve their approach.
Fair value assessments (FVAs), ongoing monitoring and regular review of products
The FCA expects firms to undertake a comprehensive fair value assessment and be able to provide evidence of their findings and conclusions. Equally important is the need to perform ongoing monitoring of product performance and take appropriate action when issues are identified.
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Target market setting and distribution arrangements
Target market assessment is another area where there is a significant gap between what the FCA expects, and the approach many firms have taken.
Conclusion
The FCA recognises that product, price, and value are key drivers of customer harm. If the product is not suitable for the customer, or it does not deliver the required benefits it is inevitable there will be poor outcomes. And if the product and price are wrong, that will flow through into complaints and customer service issues.
As noted, there will be few organisations who will be able to read this report and not see aspects of their own approach in the regulator’s findings. All firms should consider the feedback and put in place any required improvements, particularly in relation to:
Providing unrivalled compliance support to insurance intermediaries Chartered MCSI, MICA, MD at dart Compliance Ltd
3 个月Load of twaddle on capping commissions which implies that a holding insurer would be restricted from paying commission on the increase in premium, but a new insurer would be okay to do so.
FCA Compliance, Insurance, Training and Claims Management,
3 个月Neither insurer nor brokers understand what the FCA expect.Brokers do not see themselves as distributors of insurers products and insurers cant grasp the idea of harm. Really enjoyed reading this and understand what the FCA are rambling on about. I could rewrite this in plain English if they asked me nicely. Too many words !