Yesterday saw the FCA hold its first General Insurance Sector Conference. Amongst the keynote speakers were Martin Wheatley (CEO) and Clive Adamson (Director of Supervision) who gave an overview of the FCA’s current activities in the GI sector and an indication of further areas of focus over the coming year.
The following themes and issues stood out as particularly relevant and noteworthy.
- Regulation does not have to be a zero sum game; all market participants (not just customers) will benefit from improved conduct, trust and confidence in the insurance sector.
- The FCA is focussing on, and wants market participants to focus on, putting customer outcomes at the heart of their activities. The fair treatment of customers cannot be reduced to a risk to be managed and needs instead to be an integral part of firms’ culture, business models and product design.
- Under the FCA there has been a sea-change in the conduct agenda away from a narrow, tick-box and rules-based compliance regime towards a greater focus on culture and integrity and increased executive and board engagement.
- The FCA has adopted an “outcomes based” approach to regulation and supervision. Martin Wheatley described this philosophical approach as a fundamental interest in what consumers actually experience as outcomes.
- Firms need to place greater emphasis on product design, product governance and board engagement in product design and governance to ensure that customer outcomes and value for customers is at the heart of insurers’ businesses.
- Over the last year the FCA has been active in the consumer sector but intends to look more at the commercial sector in the coming year, with a focus on complex distribution chains.
- Martin Wheatley commented that the commercial sector is just as susceptible to conduct shocks as the retail sector, adding that in the past the regulatory oversight has focussed primarily on capital and profitability but in the coming months there will be greater attention paid to conduct risk, especially financial crime.
- The FCA indicated that reliance on disclosure as a means to mitigate regulatory risk has had its day and signalled a willingness to work with the market to simplify the disclosure process. Martin Wheatley referred to the FCA’s Project Innovate (launched in his recent speech to Bloomberg on 29 May whereby the FCA is opening its doors to financial service firms (large and small) who are developing innovative approaches that aren’t explicitly addressed by current regulation – or where the guidance may be ambivalent. Mr Wheatley suggested that, as part of this initiative, firms who have innovative ideas about how to simply customer disclosures may be able to obtain waivers from the FCA to trial new disclosure formats.
A copy of the conference agenda can be found here.