Fair treatment of long-standing customers in insurance

The FCA has set a deadline of three months for firms to review their business practices against the now finalised guidance on fair treatment of customers, FG16/8

There has been little softening of the expectations articulated in the draft guidance contained in TR16/2, with only minor revisions. This, coupled with the March 2016 ‘Dear CEO’ letter and the 3 month deadline given by the FCA in FG16/8 for reviewing operations, will reinforce Board expectations of swift and robust delivery on this aspect of the regulatory customer agenda.

Insurers who were in the thematic review are working through their prescribed actions to an agreed timetable which was communicated to the FCA in May 2016. Although these firms have relative clarity from the regulator on the specific steps required, for some this is a serious undertaking with a serious budget. The pressure of quickly delivering a programme of the necessary scale, on multiple fronts and with impacts across the business model, is clearly challenging – particularly when it comes on top of an already ambitious change agenda.

Most firms not included in the thematic review should, by now, have carried out an initial gap analysis of their position with regards to the standards outlined in TR16/2, with reports going through governance earlier in the year. For some firms, where clear gaps were found, implementation has progressed in priority areas. Many have been waiting for the final guidance though, to understand any potential synergies with other customer or regulatory initiatives and to move forward in a more structured way.

Given the regulatory focus and ‘Dear CEO’ letter, companies that have not yet moved on this run a high regulatory risk and now have a short deadline for reviewing their operations that overlaps with year-end reporting. The regulatory risk comes with additional customer and commercial risk, by potentially being unable to identify poor customer outcomes and falling behind peers. It is also easy to see Boards having this high on their agenda.