The FCA has published an update in its Regulation round-up, June 2017, concerning its ongoing work relating to appointed representatives.
In July 2016, the FCA published the findings of its thematic review TR16/6 (the Thematic Review) relating to principals and their appointed representatives in the general insurance sector. The FCA’s follow-up work has focused on insurance intermediaries in the London market, and in particular the risk identified in the Thematic Review arising from the increasing networks of appointed representatives developed by those intermediaries. The particular issues identified in the Thematic Review include:
- Failures on the part of principals to properly oversee their appointed representatives, including inadequate consideration of the impact on their businesses of appointing appointed representatives and undertaking inadequate due diligence prior to the appointment of appointed representatives.
- Potential mis-selling of warranty insurance by appointed representatives as a result of failure to provide adequate information.
In its follow up work the FCA has found that these issues are widespread and concerning. The FCA has undertaken interventions in more than a third of the intermediaries it has reviewed and has agreed that voluntary requirements be placed on the regulatory permissions of a number of those intermediaries. It has also commissioned two skilled persons reviews under section 166 of the Financial Services and Markets Act 2000.
The FCA remains concerned that intermediaries are not taking steps to satisfy themselves that appropriate mechanisms are in place to protect their customers. The FCA’s advice to intermediaries who have appointed representatives, is to look carefully at the Thematic Review and assess whether their current activities are consistent with both the recommendations contained in the Thematic Review and also their regulatory obligations. Intermediaries should also take steps to ensure that customers receiving products and services from their ARs are treated fairly.