FCA has published its findings from its thematic review into the fair treatment of long-standing customers in the life insurance sector. It has also written a Dear CEO letter to alert firms to the report, to encourage them to read it, and to warn of its intention to set up an industry-wide discussion with a view to industry reaching a voluntary solution to capping or removing exit and paid-up charges on investments of the type that were the subject of this thematic review. FCA assessed customer treatment at firms it sampled to determine whether:
- the firm’s strategy and governance framework resulted in the fair treatment of closed-book customers;
- the firm’s closed-book customers received clear and timely communications about policy features at regular intervals and at key points in the product lifecycle to enable them to make informed decisions;
- the firm gave adequate consideration to and took proper account of fund performance and policy values in a way that ensured it treated its closed-book customers fairly and proportionately; and
- the firm’s closed-book customers could move from products which were no longer meeting their needs in a fair and reasonable manner.
It found a mixture of good and poor practice in the 11 firms it surveyed, and generally found firms that have a culture of acting in the customer’s best interest were more attuned to the needs of closed-book customers than those that considered compliance with terms and conditions sufficient to evidence fair treatment. FCA has produced draft guidance on the actions it believes firms should be taking to treat their customers fairly in the future. Consultation on the draft guidance closes on 3 June. Also published is the Association of British Insurers’ (ABI) response to these findings. ABI notes that FCA found no evidence of any systemic intention to take advantage of customers in older closed-book products, but highlights that more work is still needed. (Source: FCA reviews treatment of life insurance customers and ABI response to findings)