FCA Business Plan 2023/24 - takeaways for insurance and pension providers

Amid a challenging and changing market backdrop - from cost of living pressures and heightened operational resilience risks, to the UK forging its own path for financial services in a post-Brexit world - the FCA has released its latest Business Plan for 2023/24. 

The Plan restates the three high level focus areas from the FCA’s three-year strategy: (1) reducing and preventing serious harm; (2) setting and testing higher standards; and (3) promoting competition and positive change. Our separate briefing note highlights the key points from Business Plan for firms generally - but what does this mean for insurance and pension providers? Here are five takeaways. 

1. Heightened support for customers in financial difficulty - putting consumers’ needs first is among the FCA's priority areas. Among the FCA's earmarked activities for the next twelve months is the publication of finalised guidance for insurance firms on support for customers in financial difficulty. The FCA wrapped a consultation on this topic in March and a final policy statement is likely to arrive in this quarter. See our previous post for more information.
    
2. Consumer Duty scrutiny at every step - the incoming Consumer Duty looms large over the Plan, which confirms that the FCA is bolstering its resources to ensure the Duty is embedded effectively within firms (and central to their technology). The FCA has warned closed-book life and pension providers in stark terms that the regulator is concerned about firms underestimating the work required, given the inherent features and complexity of such products. See our previous post for more information.
   
   
3. A more nuanced approach to FSCS protection - the FCA is particularly keen to ensure that redress systems deliver timely and fair complaint resolution and, ultimately, compensation to customers. While the PRA is responsible for rules on claims in connection with insurance provision, for pensions, the changes may be significant. FS22/5 highlighted that pension claims dealt with by the FSCS are often not compensated in full - alternative limits suggested included in-full / no-limit compensation, capping at the FOS maximum award limit (£375,000), or capping at the (now axed) lifetime allowance. See our previous post for more information.
   
   
4. Improved oversight of appointed representatives - with a view to reducing and preventing serious harm, the FCA will be testing if firms - including insurers, and in particular general insurer principals - have effectively embedded the new rules for the appointed representatives regime (see our previous post for more information). The regulator will also use improved data to target FCA scrutiny at the regulatory gateway and as part of supervision. The FCA will be continuing to review the need for further policy, or (side-by-side with the Treasury) legislative changes in this space.
   
   
5. Greater scrutiny of financial promotions - the FCA wants to mitigate potential financial losses for customers arising from mis-selling due to non-compliant financial promotions. Among the commitments within the Plan, the regulator will be increasing its technology capabilities to identify illegal promotions across social media, and taking an assertive approach to intervention when identifying non-compliant promotions. While there are certain sectors (such as crypto) where such risks may be more acute at present, insurance and pension providers will not be immune to this increased scrutiny.