The issue of culture in financial services first rose to the fore in areas such as banking but in more recent times has become an area of focus for the regulators overseeing insurance firms with a number of high-profile news stories reflecting badly on the sector. In March 2020 the FCA launched a Discussion Paper on the subject, “Transforming culture in financial services – driving purposeful cultures”. This was in the form of a “collection of essays from industry leaders, professional bodies and culture experts” exploring the role of purpose in driving a healthy, sustainable culture. Unusually, no feedback was sought but it was followed in April 2020 with the inclusion of culture as a core objective in the 2020/21 FCA Business Plan and in September 2020 with the announcement of the first in a series of webinars “Leading healthy cultures in a post-Covid world.” It is clear that culture in insurance firms is becoming a key area of focus for the regulator and at ICSR we are advising our clients to ensure that the question of culture is a key area of focus and considered and documented in all major change projects. We anticipate the regulator will issue further guidance, discussion papers and changes to regulations as it seeks to deliver on its commitment made in the 2020/21 Business Plan.

The FCA work on Insurance Distribution started in March 2017 with the publication of their first Consultation Paper. Subsequent additional Consultation Papers were released in 2017, followed by draft rules in late 2017 and early 2018. Final rules, comprising an update to the Handbook were released in May 2018. In 2019, Lloyd’s took further interest in the issue, publishing a private paper on the implementation within the Lloyd’s market, based on investigative work carried out with a small number of Lloyd’s firms. The Lloyd’s report highlighted a number of good practices, areas where some firms will need to improve their approach and areas where Lloyd’s intends to improve its own controls through upgrades to processes such as the DUA processes and to its approach, for example, in the form of amendments to Minimum Standards 9 “Customers”. Lloyd’s also recognised two areas which they considered to be key priorities: manufacturer identification and the product approval process. There has been no further public statement on the issues since then, probably in a large part due to the impact of the Covid-19 pandemnic on the operations of firms and the regulators, but it is our expectation that Lloyd’s will conduct further review of firms practices and we may also see the regulator do the same with non-Lloyd’s firms.

In December 2019, in a somewhat unsual combined move, the Bank of England, PRA and FCA issued a joint Consultation Paper on “Building operational resilience: impact tolerances for important business services”. The initial Consultation Period was due to close in April 2020, but the onset of the Covid-19 pandemic caused the date to be extended to 1st October 2020. That said, the regulator made it fairly clear that it would be using firm’s responses to the pandemic to help inform it’s understanding of the operational resilience within firms and what steps may be required to improve performance. The report introduced the concept of ‘Important Business Services’ and ‘Impact Tolerances’. ICSR has been discussing the interpretation of these terms with clients and helping them identify and document their approaches. A series of webinars have also been delivered to help firms understand the issues and develop and approach to identifying any issues that may need addressing. Co-ordinated Policy Statements were issued by the FCA and PRA on 29th March 2021, with the initial deadline for compliance with the Policy Statement requirements set for 31st March 2022.

The FCA first started looking at pricing practices in the motor and hosuehold insurance markets as part of the work planned and announced in its 2018/9 Business Plan released in April 2018. A subsequent super-complaint filed by Citizens Advice with the Competition and Markets Authority gave added focus to the work and the FCA’s interim report concluded their was evidence of harm being caused to consumers. In September 2020 the final report and a consultation on proposed changes to the Handbook were released, which included comments bringing other general insurance products into scope with changes propsoied to the product governance process (PROD) and to any product for which auto-renewal was offered. Policy Statement PS21/5 was issued on 24th May 2021 with implementation deadlines on 1st October 2021 and 1st January 2022 for various changes required.

The FCA launched their consultation on Vulnerable Customers in July 2019. Their objective is to create a regulatory environment that ensures vulnerable consumers are treated fairly and consistently across financial services sectors. Finalised Guidance on the fair treatment of vulnerable customers was issued on 23rd February 2021.

The FCA have grouped firms as members of portfolios of firms that share a common business model. The portfolio strategy letters below set out their view of the main risks of harm in each portfolio and the actions the FCA expect firms to take as well as providing guidance on what the FCA  will be doing to reduce the level of harm in that sector.

• Portfolio strategy letter to firms in the Personal & Commercial Lines Insurer (PL&CL) portfolio: identifying and remedying harms (8^th January 2020)
• FCA Supervisory strategy for Personal and Commercial line insurers (28th April 2021)
• FCA Supervision Strategy for Personal and Commercial Lines Insurance Intermediaries (4^th September 2020)
• FCA Supervision Strategy for Lloyd’s & London Market Intermediaries and Managing General Agents (LLMI) (3^rd November 2020)
• Risks Life Insurance firms pose to consumers or markets (6^th December 2018)
• FCA supervision strategy for Price Comparison Websites (PCWs) (16^th November 2020)
• FCA Supervision Strategy for Lloyd’s & London Market Insurers and Others (LLM) (23^rd November 2020)
• FCA Supervision Strategy for Lloyd’s & London Market Insurers and Others (LLM). (28th September 2021)
• FCA Supervisory Strategy for Life Insurers (5th August 2021)