This is framed as another part of its deregulatory agenda to support growth and competition whilst maintaining consumer protection.
This is a further example of where the FCA is relying on the overarching principles of the Consumer Duty, such as fair value, as the main supervisory tool, rather than detailed rules.
In a separate publication from its Enforcement area, the FCA says that it currently has 11 open Enforcement investigations into firms over breaches of the Consumer Duty, 6 of which relate to the insurance sector. This really demonstrates the importance of complying with the Consumer Duty.
The main points and areas in the simplifying the insurance rules consultation are:
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Cutting down on some ICOBS disclosure requirements Increasing flexibility in means of disclosure including increased use of digital channels.
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Simplifying rules for advised sales of insurance products.
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Amending rules for professional indemnity insurance (PII).
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Digging more into the detail, a few points that struck me.
There is a relatively short period over the summer to respond to the consultation as the FCA believes that most people will support the proposals. ITC is reviewing the Consultation Paper in more detail to see whether there is a need to respond. ITC will also prepare for any changes if the new rules are implemented, such as possible alterations to sales literature, disclosure statements, TOBAs etc. throughout the customer journey.
There are several areas that ITC has already identified.
Firstly, that the FCA is potentially saying that firms should disclose the commission earned under the general law of agency and fiduciary obligations rather than what the ICOBS rule currently say, where commission disclosure only applies to commercial customers and then only when they request it. This point is an obvious read across from motor finance commission, which we are all familiar with!
Secondly, the FCA is not currently going to change the GAP insurance moratorium rules for motor dealers, despite their market intervention in 2024. In our opinion, GAP insurance is one of the products, across the whole of the financial services industry, that has been through the most scrutiny from a fair value perspective! Instead, the FCA wants to collect more of its annual Value Measures data to assess the impact of its intervention. This probably means seeing an increase in the percentage of premiums paid out in claims metric, which may take a few years to come through given the longer policy period of GAP insurance contracts. We have previously commented to the FCA on the flaws in their Value Measures calculations, especially for GAP insurance, and we will continue to do so.
This is a further demonstrable benefit of being part of the ITC network, as you can be confident that by continuing to follow our processes and procedures you are complying with the Consumer Duty, and your customers are receiving good outcomes.
