FCA warns insurance firms over value for money

Insurers’ manufacturing, sales and distribution approaches can lead customers to buy inappropriate products, pay excessive prices, or receive poor service, the FCA has warned.

In a paper this morning, the FCA highlights that distribution chains can involve multiple parties and, because of the way each is paid, consumers end up paying a higher price – as well as running the risk of unsuitable purchases when insurance is lumped in with non-financial sales, for example cars or white goods.

The watchdog notes that non-regulated groups such as retailers can potentially exert “significant influence” on distribution chains, and that additional complexity in chains can mean customers pay above the odds for some products.

Director of supervision for retail and authorisations Jonathan Davidson says: “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.”

The FCA notes that both the the recent Insurance Distribution Directive and Senior Managers and Certification Regime require insurance firms to consider value in the distribution chain and then make senior staff accountable for it.

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