On 17 May 2007 the FSA published an insurance sector briefing (“the Briefing”) on its thematic work.

The Briefing reported on two pieces of thematic work that were undertaken during 2006, that were:

  • The availability of ongoing advice to with-profits policyholders; and
  • The quality of post-sale communications by insurers to consumers with with-profits and other forms of life policies.

Both of these topics are linked to the FSA’s work on treating customers fairly (“TCF”) and the extent to which firms had implemented TCF programmes and delivered outcomes to consumers. The key findings set out in the Briefing were:

  • Many of the 32 million with-profits policyholders no longer had access to the adviser who sold the policy. An independent survey of IFAs was conducted for the FSA and found that even for those policyholders that do have an adviser, many were reluctant to advise on existing with-profits policies.
  • Policyholders who were left without advice were more likely to rely on post-sale communications from the insurer. Some of the main failings found were in respect of setting out and/or explaining guaranteed annuity rates, the use of complex terminology without Insurance regulatory bulletin Issue 6 – June 2007 www.mills-reeve.com Telephone: 0870 600 0011 explanation and a failure to explain how the actions of an insurer may affect the policyholder.

The findings suggest that some firms are not currently treating their customers fairly. Sarah Wilson, FSA director and insurance sector leader, said:

“Senior management in both insurers and advisory firms need to re-examine their existing approach and, where necessary, implement changes. Advisers need to provide advice where they have created an expectation that they will do so. Insurers need to ensure that post-sale communication is clear, fair and not misleading. We will take appropriate supervisory or enforcement action in cases where we find that customers are not being treated fairly.”

The FSA now expects firms and trade bodies will continue to engage on the issue raised in the Briefing and work towards the relevant TCF target outcomes.

The FSA expects senior management to review the questions posed in light of their firm’s own position in relation to the issues raised and ensure that appropriate changes are implemented no later than December 2008. The FSA will include questions in relation to the content of the Briefing in ARROW assessments that it carries out and also will take relevant supervisory or enforcement action where appropriate if it finds that customers are not being treated fairly.