The insurance sector has been informed through another speech by the FCA of plans for a potentially very important thematic review. The lack of fanfare and formality does not undermine the likely significance of the reviews instigated. Interpreting the content of one person's speech will leave the sector guessing as to the precise terms of reference of the reviews until they are well underway – or even complete.
The FCA today published the full speech given by Simon Green, Head of General Insurance and Protection, at the Incisive Media Insurance Age Regulation event on Tuesday. Before seeing the full text, we issued an alert to insurance clients summarising the anticipated issues under consideration and the steps insurers and brokers need to take to make ready to respond to the review and demonstrate their compliance with the existing regime's rules and principles and industry guidance.
The full speech gives another strong steer as to what the FCA means by 'conduct': "People need confidence and trust that you will act with fairness and integrity. They need to feel their fair and reasonable expectations are at the centre of how the insurance market operates. And, most importantly, they expect you to demonstrate this through the way you treat your customers, the way you behave towards each other, and how you operate in the market. This is what the FCA means by ‘conduct’." The FCA is clear about its aims: "Our remit is very straightforward - to make the market work well. That means a market that works well for both participants and customers. This should be in all our interests – profits for good firms; exits for bad ones."
On the thematic review into conflicts managements, Simon Green made clear "I am particularly interested in how insurance brokers identify and manage potential conflicts where they receive revenue from both their customers and insurers. To be absolutely clear, when I talk about revenue received from insurers I do not mean the payment of broking commission in a normal range. I am talking about profit share, volume arrangements and other payments received from insurance companies. We need to establish whether the flow of this type of revenue from insurers to brokers acting as agent of a customer might: unduly influence a broker to recommend an insurer against the customer’s best interest; and/or, cause a broker to improperly perform its duties to its customer".
Tuesday's announcement followed a similarly low-key launch of the FCA's claims handling review by Martin Wheatley in May: again, no great detail has been provided about a significant piece of supervisory work to be undertaken by the regulator, described only in passing during a speech to industry.
This pattern suggests the FCA does not propose to restrict its terms of reference or scope for such reviews, making them all the more unpredictable and casting the net wider over an entire sector. Firms contacted to provide information will be able to tell us more about the FCA's particular concerns and interests, but everyone else will have to wait for the thematic report published in due course.