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Compliance Portal
August 22, 2024
Following a review of general insurance (GI) and pure protection (PP) manufacturers’ and distributors’ product oversight and governance arrangements, the FCA has published a Thematic Review – TR24/2 – “Product Oversight and Governance thematic review – General Insurance and Pure Protection (PROD 1.4 and PROD 4)”. At 43 pages it is lengthy and detailed. The FCA has also published the annual Value Measures data for the calendar year 2023 alongside the review report.
The FCA’s work has assessed the extent to which a representative sample of firms in the sector are meeting their obligations under PROD 4, including whether they have appropriate governance and controls to ensure and demonstrate that the products they manufacture and distribute offer fair value to customers. The FCA included 28 manufacturer firms (22 GI and 6 PP) and 39 distributor firms (29 GI and 10 PP) in its sample, reviewing 45 GI and 11 PP products from manufacturers, and 47 products for the distributors
The report sets out the overall findings of this review as well as the FCA’s next steps and expectations. We recommend that all insurance firms read the report urgently and, in the FCA’s words, “assess whether and to what extent these issues apply to your activities”.
Overall, the FCA is “very disappointed” to see many firms failing to fully meet their regulatory obligations under PROD 4, despite what the FCA describes as its “extensive previous work and focus on this area” and the clear expectations it has set. The FCA has found widespread shortcomings amongst both the manufacturers and distributors included in the review.
Manufacturers
- The FCA found most product manufacturers have materially strengthened their product oversight and governance arrangements and appointed appropriate senior managers responsible for product governance.
- The FCA saw shortcomings or inconsistencies in many firms’ product governance arrangements and how they applied these.
- Many manufacturers are not adequately assessing and evidencing how their products deliver fair value and good outcomes.
- The FCA is particularly concerned that this means firms are not identifying instances where products are not delivering fair value to customers.
Distributors
- Some distributors have strengthened their governance and oversight of their product distribution arrangements, and the FCA saw that relevant senior managers had taken responsibility for this. These firms can evidence that they considered the impact their activities and remuneration have on the products and the value delivered to customers.
- Some distributors have made much more limited progress in understanding their responsibilities under PROD 4.3 and in considering the benefit of their activities to customers compared to the remuneration they receive.
Next steps
- All manufacturers and distributors of general insurance and pure protection products should consider the contents of this report urgently, assess whether and to what extent these issues apply to your activities. If you identify shortcomings in your firm’s product governance arrangements, the FCA expects you to act promptly to remediate them. This includes redress to customers where harm has been identified. See examples of better and poor practice set out in Chapters 4 and 5 of the report.
- In addition to the published report, the FCA will issue individual feedback letters to the firms included in the review.
- The FCA is also actively considering the most appropriate supervisory and regulatory actions and interventions it can take to urgently address the issues identified by the work. These include getting firms to withdraw products from the market and the use of its skilled person review tool, where appropriate.
- Where the FCA sees that failings have resulted in significant harm to customers, it will seek to ensure firms and their senior managers are held accountable for these failings and remediate this harm.
Need help? Speak to ICS; our consultants can assist in reviewing clients' product oversight and governance regimes, and can help identify how your business can demonstrate that your achieving good outcomes for customers.
