VIEW: On service levels in general insurance

The Financial Conduct Authority’s Thematic Review into General Insurance, published in April, makes for sobering reading. The watchdog found a “significant potential for harm to consumers” and went on to say that, “The widespread extent of these extremely disappointing given the focus and emphasis placed on these areas by the FCA in recent years.”

The FCA concentrated on risk management standards in particular, saying that “even where the purpose and intent of the firm was to produce GI products which...resulted in good customer outcomes,” many firms were let down by, “failings in approaches to risk management...including in relation to delegated parties within distribution chains”.

It’s disappointing whenever a sector that is built around delivering risk management solutions to its clients falls short on risk management within its own governance systems – a bit like finding a doctor who smokes or a solicitor who hasn’t got round to writing a will. However, for those who are both willing and equipped to do the right thing, the FCA report is very encouraging. In talking about the two major pieces of legislation to hit the insurance sector in the last two years – the Insurance Distribution Directive and the Senior Managers and Certification Regime – the FCA doesn’t get buried in the detailed requirements of product governance guidance or categories of responsible individuals; instead it measures firms against the spirit of these pieces of regulation: acting in the best interests of the client.

The FCA’s report also says, “there were also many other GI distribution chains and products we considered in our work which appeared to be delivering good value insurance products and appropriate outcomes.”

The vast majority of insurance professionals do indeed deliver a high level of service to their clients. The good news is that the regulator has made this high level of service the focus of its supervision – in future, professional behaviour and compliance will go hand-in-hand, which is good news for anyone who is serious about risk management.

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