The FCA’s Business Plan for 2015/6 was published yesterday. Like many FCA documents, it’s longer and more repetitive than it needs to be; and the important points are scattered across it, like Directive-implementing rules scattered across a handbook. So the temptation to give up is significant, but it comes with a significant regulatory risk. Why?

The FCA’s “Key priorities for 2015/6 includeIndividual accountability … Enforcement against individuals“; and its “Market-focused work programmeincludes “General insurance and protection … The role of Appointed Representatives.

In particular, the FCA is expecting to:

  • Consult on a ban of all general insurance “opt-out” sales;
  • Issue guidance to “improve the way add-ons are sold on price comparison websites“;
  • Make final rules to address competition issues in the Guarantee Asset Protection (GAP) market;
  • Consult on the introduction of monetary value measures for general insurance products (for example, the forced publication of claims ratios); and
  • Publish a report on the effectiveness of delegated-authority distribution-chain controls.

The FCA will also:

  • review the role of Appointed Representatives …“; and
  • consider the role and work of the principal firm in ensuring that it has adequate and robust systems, controls and resources to effectively select and oversee its Appointed Representatives…“.

These things matter because opt-out selling is still relatively common; changing the GAP policy distribution model could have material unintended consequences for both firms and consumers; and the quality of the systems and controls in the delegated-authority distribution-chain model vary significantly from one to the next.

There are also significant qualitative differences between the principals of ARs, especially in the pre-appointment due diligence process, the extent to which financial promotions, advice, and systems and controls are checked, monitored and quality assured; and the technical and other support that principals are prepared to give to their ARs to protect the principal’s reputation and the AR’s customers. In fact, it’s still relatively common for principals to offer their ARs an AR agreement that doesn’t meet the minimum statutory requirements, and doesn’t therefore generate an effective AR appointment – an error that exposes the principal and its AR to significant and continuous legal and regulatory risk.

We should probably therefore expect to see some significant changes in the general insurance distribution chain model, and some significant regulatory action against firms and individuals over the next 12 months. As someone might have said: “firms have been warned“.