The FCA issues a 'Dear CEO' consumer duty letter to general insurance and pure protection firms

February 20, 2023

The FCA has issued a ‘Dear CEO’ letter to general insurance and pure protection sector firms as part of its promised sector-specific publication of information and assistance in relation to the Consumer Duty. The letter sets out:

• a reminder of the implementation timeline;
• key elements of the Duty and how it applies;
• FCA expectations for how firms should embed the Duty, including relevant examples of good and poor practice;
• feedback from the FCA’s recent review of firms’ implementation plans;
• the FCA’s approach to supervising the Duty and planned next steps;

and specifies that the FCA:

• expects the Duty to be a top priority for the CEO / the most senior manager personally; and
• wants good outcomes for customers to be at the heart of firms’ strategies and business objectives.

The letter covers and, to a degree, clarifies:

• the scope of the Duty for GI and PP firms (‘retail customers’ include some commercial customers to the extent that, for firms subject to the ICOBS, the scope of the Duty follows the position in ICONS);
• an overview of the requirements of the Duty (the Finalised Guidance provides an overview of the four customer outcomes, including examples of good and poor practice, and is supported by explanations in the letter);
• the FCA’s expectations of how GI and PP firms should embed the Duty (it sets out initial areas where firms should particularly focus, including the effectiveness of product governance arrangements, customer communications and claims processes and outcomes);
• the recently published feedback following its review of firms’ implementation plans; and
• its supervisory approach and next steps (the Duty is being prioritised at every level of the FCA, from the board down, and will drive its supervision strategies and prioritisation).

As a reminder, important dates are:

• by the end of April 2023, manufacturers should have completed reviews necessary to meet the outcome rules and shared necessary information with their distributors;
• the Duty comes into force on 31^st July 2023 for new and existing products and services for sale or renewal; and
• on 31^st July 2024 the Duty comes into force for closed products or services.

There are two Annexes to the letter.  The first carries the title ‘How the Duty applies to GI and PP firms’, and comments specifically on vulnerable customers, the cost of living and the AR regime.  The second sets out key things for firms to consider, split up into commentary in relation to each of the four consumer outcomes.

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