Insurance Regulatory eBulletin - Conduct regulation

On 21 June, the FCA published its monthly Regulation round-up. The hot topics included the consultation on regulation of claims management companies* and simplifying access to the GABRIEL system. This edition includes the following articles that are relevant to insurers or insurance intermediaries:

  • Digital regulatory reporting*
  • The Bank of England is consulting on a new messaging standard*
  • Live & Local 2018/19 events announced*

Digital regulatory reporting
The FCA are working with the Bank of England on six month pilots to build upon the Proof of Concept developed at the FCA’s November TechSprint on digital regulatory reporting. The pilots will evaluate the feasibility of scaling the work from the TechSprint considering two use cases focusing on firstly, retail reporting and secondly, on wholesale reporting.

Transparency is an integral part of the pilots and the FCA welcome and encourage input from across the industry. All findings from the pilots will be published and the intended output will be open source. The FCA will be providing opportunities for firms to provide feedback on the direction of the pilots as they progress.

For further information, including on how to participate in the pilots, email

The Bank of England’s consultation on a new messaging standard
The major UK payments systems (CHAPS, Faster Payments, Bacs) are moving to the global messaging standard for payments, known as ‘ISO 20022’. The coordinated adoption of a single standard across UK payment systems is aimed at bringing many benefits for payments providers, and for the businesses and households they serve. The design of the standard is consistent with that of many other countries and is a significant step forward in harmonisation, both domestically, and for cross-border payments.

To find out more about the proposals and to participate in the consultation it is available on the Bank’s website here.

The deadline for responses is 18 July.

Live & Local 2018/19 events announced
The FCA are launching the first set of UK-wide events in the 2018/19 Live & Local programme. For general insurance firms, they are currently offering:

  • interactive workshops on the extension of the Senior Managers and Certification Regime (SM&CR) and the Insurance Distribution Directive (IDD);
  • Q&A roundtable discussions where general insurance firms engage with a panel of FCA and industry representatives in an open, informal setting.
Registration is now open for these events taking place from September to December 2018. Visit the FCA Live & Local webpages for more information.

FCA 2018/25 Insurance Distribution Directive Instrument 2018
On 25 May, the FCA published Legal Instrument No. 2018/25, Insurance Distribution Directive Instrument 2018, which amends the FCA's Handbook of rules and guidance as detailed in the Instrument to give effect to the Insurance Distribution Directive in the FCA Handbook.

Instrument 2018/25 comes into force on 1 October 2018, except for Annex A (Glossary) Part 1 and Annex G (General Provisions) Part 1 which came into force on 25 May 2018.

FCA Handbook Notice 55
On 25 May, the FCA published a Handbook notice which introduces the updates to the Handbook. The changes are related to the General Data Protection Regulation (GDPR), the Data Protection Act 2018 (DPA 2018), the Insurance Distribution Directive Instrument 2018 (FCA 2018/25), and Supervision Manual (Reporting No 8) Instrument 2018 (FCA 2018/26) and Financial Services Compensation Scheme (Funding Review).

FCA’s approach to the review of Part VII insurance business transfers – FG18/4
On 29 May, the FCA issued finalised guidance detailing its approach to reviewing insurance business transfer schemes under Part VII of the Financial Services and Markets Act 2000 (FSMA). The PRA leads the Part VII process, and is responsible for specific regulatory functions such as providing certificates. However, the FCA also have an active role in the process and are entitled to be heard on an application to sanction a Part VII Transfer. The views the FCA give to the Court are based on its assessment of the Part VII Transfer against its own statutory objectives, which are distinct from the PRA’s statutory objectives.

The purpose of the guidance is to help with both the process and the considerations for a Part VII Transfer, but is not intended to explore all the different aspects of the FCA's role in the process, or all of the issues which firms may need to consider. However, the FCA expect applicants to explain why they have diverged from the guidance where it is relevant to a particular Part VII Transfer and is intended to help firms identify those areas of difference (from expectations and examples set out in the guidance) early enough in the process such that court dates and timelines are not jeopardised by the FCA’s challenge.

FCA Quarterly Consultation Paper No 21 – CP18/14
On 1 June, the FCA issued its quarterly Consultation Paper No 21 on proposed miscellaneous amendments to the FCA Handbook. The consultation paper proposes changes to:  
  • dis-apply some Handbook rules to authorised professional firms who carry out non-mainstream regulated activities;
  • the appointed representatives appointment form;
  • the COBS rules for insurance distribution;
  • FEES 4.2 relating to the tariff data used to calculate fees for newly authorised firms;
  • FEES 4.4, FEES 4 Annex 1AR and FEES 5.4 relating to the tariff data (measure of size of firms within a fee-block) the FCA will use to calculate insurers’ periodic fees and levies from 2018/19;
  • BCOBS 7 as a result of detailed technical discussions with firms preparing to implement the requirements, which have identified that certain rules do not achieve the outcome set out in PS17/26;
  • DEPP and EG following the transfer of the Northern Ireland mutual societies registration function to the FCA;
  • DEPP and EG following the implementation of the Money Markets Funds Regulation and amendments to European Social Entrepreneurship Funds (EuSEF) and European venture capital funds (EuVECA) Regulations.
Comments on this consultation paper must be submitted by 30 June  except for the FEES Manual changes which have a deadline of 31 July.

Claims management: how the FCA propose to regulate claims management companies – CP18/15
On 5 June, the FCA published proposals outlining how it will regulate claims management companies (CMCs) when regulation passes to the FCA on 1 April 2019. Their aim is that CMCs are trusted providers of high quality, good value services that help customers pursue legitimate claims for redress.
The proposals outlined in the consultation include:
  • requiring CMCs to provide to potential customers a short summary document setting out important information about the services provided;
  • requiring CMCs that buy ‘lead lists’ from third parties to carry out due diligence around how those leads were obtained;
  • asking CMCs to record all calls with customers, and to keep the recordings for a minimum of 12 months;
  • requiring firms to hold capital linked to the type of business they undertake;
  • a new requirement to protect client money.
The consultation sets out the FCA’s proposed approach to authorising both existing and new CMCs including how temporary permissions will operate.
The deadline for providing feedback on the proposals is 3 August 2018.

FCA Data Bulletin Issue 13: The retail intermediary sector
On 7 June, the FCA has published a Data Bulletin (Issue 13) which covers its analysis of 12,000 intermediary firms that have submitted feedback via the Retail Mediation Activities Return (RMAR). The edition provides an update of revenue trends in 2017 and analysis of activities and information on advice and charges for the last full financial year. Some new analysis this year focuses on capital resource requirements and professional indemnity insurance (PII) premiums. The highlights are:
  • intermediary activities have shown healthy revenue growth in 2017 with total reported earnings from the 3 business activities (retail investments, home finance (mortgage) and non-investment insurance was £22.1 billion in 2017 (£20 billion in 2016);
  • financial adviser firms showed strong growth in aggregate profits in 2017 with total reported earnings by insurance intermediaries increasing by 7% compared to 2016 to £16.2 billion in 2017;
  • over two thirds of firms were required to hold capital of £20,000 or less;
  • firms paid over £300 million in PII premiums in 2017;
  • firms providing retail investment advice had 2.8 million ongoing clients and provided 1.2 million  initial / one-off advice services in 2017.
Thematic review into fair treatment of longstanding customers in the life insurance sector
On 12 June, the FCA announced that its investigation into Scottish Widows has discovered an insufficient basis to justify any enforcement action. The investigation into Scottish Widows, which began on 3 March 2016, also focused on Police Mutual, Prudential, Countrywide Assured, Old Mutual, and Abbey Life. The investigation into Police Mutual was closed on 7 September 2017 with no further action, and investigations into the other firms are on-going, with no decisions having been reached at time of this announcement. 

The urban-rural differences in how consumers experience financial services in the UK
On 20 June, the FCA published the latest analysis from its Financial Lives survey. Financial Lives is the FCA’s survey of nearly 13,000 adults and is the largest tracking survey in the UK specifically looking at consumers and their use of financial services.

The initial October 2017 report, ‘Understanding the financial lives of UK adults’, provided initial results from the survey, with age as the main focus of the FCA analysis. This new report, ‘The financial lives of consumers across the UK’, puts the spotlight on the financial situation of people across the UK and highlights where in the UK people may be more vulnerable and finds notable differences between urban and rural areas.

In rural areas, where there is greater reliance on bank branches, a higher proportion of people have difficulty getting to a bank and tend not to be able to use online banking. However, people in rural areas are more likely to be satisfied with their overall financial circumstances. By contrast, people living in urban areas are less likely to be satisfied with their overall financial position, are more likely to use high-cost loans and on average have higher levels of unsecured debt.

Feedback Statement on Call for Input on access to insurance – FS18/1
On 25 June, the FCA published its response (Feedback Statement FS18/1) to the Call for Input on Access to Insurance made in June 2017. In the Call for Input the FCA invited views on the ability of consumers who have, or have had cancer, to access travel insurance.

The results of the Call for Input highlighted:
  • There is a lack of quality information on alternative options available to consumers after they had received a high quote or had been refused cover, which can cause consumers to assume that they are uninsurable.
  • A general lack of understanding amongst consumers and firms around insurance terms and the risk factors that are considered by providers when calculating the premium.
  • The lack of transparency around pricing, the risk factors which drive quotes and how premiums are calculated which limits consumers’ awareness about their options and can mean that they have difficulties in finding competitive insurance that is appropriate for their medical condition.
In its Feedback Statement the FCA is challenging the industry to improve access to insurance for people with pre-existing medical conditions as a result of its concerns that consumers find it difficult to access the specialist travel insurance market. As a result, the FCA will work with key industry stakeholders to create a new service which will redirect customers to specialist providers.