The Financial Conduct Authority (FCA) has written to the chief executives of all UK general insurers, urging them to improve their services to customers or risk “a more interventionist approach” from the regulator in the future.
A series of investigations into general insurance, particularly the distribution chain and delegated authority arrangements, has resulted in a new report from the FCA that accuses insures of failing to improve manufacturing, sales and distribution approaches.
These failures have led to some customers purchasing inappropriate products, paying excessive prices or receiving a poor claims service.
FCA retail and authorisations supervision executive director Jonathan Davidson wrote in his letter to the chief executives concerned: “Some progress has been made following our previous work in this area. However, many general insurance firms have not responded appropriately and are not sufficiently focused on customer outcomes, including the value of the products and services their customers receive.”
Davidson reminded the letter’s recipients of the recent regulatory action the FCA has taken in insurance, including the case of Liberty Mutual Insurance Europe SE, which was fined £5 million for failings in its oversight of claims handling and customer outcomes, as well as Carphone Warehouse’s £29 million fine for mis-selling mobile phone insurance.
He advised chief executives to ensure that the insurers they oversee act fairly, honestly and professionally in accordance with the best interests of customers.
In a statement, Davidson said: “Through our recent work we have continued to see poor manufacturing, sales and distribution approaches leading to sales of low value and inappropriate products, unfair treatment of claims and service issues.”
“The widespread extent of these issues demonstrates a culture which pays insufficient regard to customer outcomes in some parts of the general insurance sector. We are going to carry out further supervisory work to make sure that firms meet their obligations and will not hesitate to use the full range of our regulatory powers.”
Responding to the FCA’s report, Hugh Savill, director of regulation at the Association of British Insurers, said: “The FCA’s report is based on findings in a limited range of products, which make up a tiny part of the large general insurance market. The majority of customers, buying direct, from a broker or from a comparison website, should not be concerned with these findings.”
“People continue to get good value, quality products from their insurers, which help them protect their homes, vehicles and livelihoods. There are clearly remaining problems in some distribution chains, and it is very important that these are addressed.”