The Financial Conduct Authority (FCA) is looking to update the rules governing financial services and, particularly, the UK’s commercial insurance sector.
“We are firmly committed to playing our part in supporting economic growth,” FCA chief executive Nikhil Rathi declared when the broad rule review was announced. “The Consumer Duty marked a major shift for firms and consumers by setting higher and clearer standards of consumer protection and requiring firms to put their customers’ needs first.
“We now want to seize the opportunity of the Duty and the move to a clear outcomes-based approach to streamline our rulebook, lowering costs for businesses and supporting the competitiveness and growth of the economy.”
Aside from the general rules, regulations in the £15.5 billion commercial insurance market in the UK will also be reviewed with the goal of simplifying them.
The FCA highlighted: “The launch of both reviews comes on the day the regulator publishes its first report dedicated to how it has taken forward its secondary objective to support UK competitiveness and economic growth over the medium to long term.
“Recognising the vital role that the regulator plays in enabling new financial services firms to get off the ground, the FCA has improved its authorisation process with 98% of cases now assessed within statutory deadlines, up from 78.9% in Q1 (first quarter) of 2022/23.”
In response to the announcements, the Association of British Insurers (ABI) offered insights through regulation director Charlotte Clark (pictured left).
“The financial regulators play a crucial role in ensuring that the UK is welcoming to new business and provides an environment in which existing firms can thrive and grow,” Clark noted. “This is even more important given the new government’s Growth Mission. Economic growth can and should benefit consumers, and we have consistently called for our sector’s regulators to have an objective linked to growth and the UK’s international competitiveness.
“We welcome the FCA’s report on the implementation of the secondary objective on growth and competition, and the commitment to advancing its ambitions. This report marks the beginning of a process that could boost UK prosperity while delivering good consumer outcomes.”
Clark also welcomed the watchdog’s work in ensuring that rules for the commercial market are balanced appropriately with consumer protection and its efforts to collaborate with the sector in removing barriers or friction for firms.
“One year on from the implementation of the Consumer Duty, we’re pleased the regulator is working with industry to understand where duplication exists in the system and how regulatory requirements could be simplified, to make sure it’s working effectively,” she added.
Lloyd’s Market Association (LMA) CEO Sheila Cameron (pictured right), meanwhile, pointed to what she called a “truly collaborative” undertaking.
Cameron commented: “The FCA announcement is a significant milestone and a reflection of the hard work on the part of the FCA, and in particular the director of insurance at the FCA Matt Brewis, as well as the tireless efforts of the main trade bodies in the insurance industry: the LMA, LMG (London Market Group), LIIBA (London & International Insurance Brokers’ Association), IUA (International Underwriting Association), BIBA (British Insurance Brokers’ Association), and ABI. It has been a truly collaborative process on all sides.
“The Lloyd’s Market Association is pleased that the FCA is moving ahead with this discussion paper in line with many of our own recommendations on the issues around the definition of consumer, lead insurer, and co-manufacturers and improving the classification of bespoke products. I believe it clearly demonstrates that the FCA is taking its secondary competitiveness objective seriously to the benefit of the London commercial insurance market.
“We will work with the FCA to implement any resultant changes from the consultation process, assuming they are in line with the ultimate priority of our members to reduce unnecessary bureaucracy and cost wherever possible when it is not detrimental to consumer protection.”
Inviting views on whether changing how customers are categorised could provide significant benefits, the regulator will also be consulting a new independent experts panel when preparing cost-benefit analyses.
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