The chair of the Protection Distributors Group (PDG) has welcomed the latest ‘Dear CEO’ letter from the Financial Conduct Authority to insurers, but said it wants clarity from the watchdog on where protection will sit in the advice guidance boundary review.
Neil McCarthy said the PDG is happy to see the FCA’s clarification of what the regulator wants from businesses serving consumers in the insurance market.
It supports the regulator’s intention and agrees with the market-wide and life insurance-specific priorities.
The letter discussed the insurance market priorities from 2023–2025, four of which were embedding the Consumer Duty, environmental, social and governance (ESG) priorities, operational resilience and the increasing reliance on third parties, and improving oversight of appointed representatives.
The PDG highlighted a comment within the letter “where regulated advice is not provided, firms consider the guidance they can provide to deliver good outcomes for their customers”.
The FCA is working with the Treasury on the advice guidance boundary review, however, this is referring exclusively to advice and guidance for investment decisions.
The group said it wants “clarity as to whether this reads through to protection in its entirety and suggest an equivalent document relating specifically to pure protection would add value and clarity”.
It added that financial protection remains an essential part of financial planning and should be covered as it is the “corner stone of the FCA’s advice/guidance review”.
The protection network was “delighted” that its concerns were reflected in the FCA letter which stated evidence of poor selling practice of protection products is still being seen.
Insurers are taking appropriate action in response to this but it is “considered that insurers could often have acted sooner”.
The FCA said it wants to see due diligence improve as well towards new brokers “to avoid their products being sold to customers for whom they will not pay out as expected”.
The PDG said it supports the FCA’s efforts in the areas outlined but has been urging insurers to act in this way for a long period of time.
It also wants to see protection differences outlined to pensions, annuity, investment and general insurance.
Furthermore, it believes more specific guidance should be outlined as to life claims management and service standards required of insurers, OSPs and closed book administrators.
Insurers’ responsibilities in assessing new distribution market entrants and the quality of customer outcomes achieved by existing ones.
Finally, protection retailers’ duties either side of the advice guidance border in protection.
