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FCA Business Plan 2014/15
Ciara Russell contributed to the writing of this blog post.
Last week, the Financial Conduct Authority (FCA) published its business plan for the year 2014/15. The plan sets out the objectives of the FCA over the coming year and areas they are focusing on. It is not dissimilar to their approach document released before the split of the Financial Services Authority (FSA) into the FCA and Prudential Regulation Authority (PRA). In this blog, we outline how the insurance sector is impacted by the FCA’s upcoming activities and look at relevant studies.
The FCA also came under scrutiny from the market after press coverage of their proposed work on the treatment of long standing customers in life insurance. We will also take a look at why concerns have arisen.
General progress and outlook
The FCA is positive in discussing their progress in the last year and hopes for the coming year. It is happy with the progress it made in its first year and is now citing culture is the buzz word of the year.
The aims of the FCA are unchanged, with consumers remaining at the heart of its activities The FCA will continue to adopt a forward-looking, judgement based and proportionate approach to its supervision of 26,000 businesses. Its tools are also unchanged and in particular, there is a continued focus on thematic reviews.
Firms may be pleased to see the FCA’s comment that they aim to minimise the burden to firms and focus on adding value.
Activities for 2014/15
The FCA has taken on new responsibilities this year, mainly regulation of consumer credit. The insurance sector remains an important focus of its ongoing activities e.g. post RDR implementation review and competition studies. Analysing market data is a method to inform policy making and regulation, helping achieve the FCA’s aims. The following sections outline the activities we can expect to see over the coming year.
Upcoming thematic reviews and market studies
Thematic reviews will cover a broad range of topics. There will be a focus on risk management, governance and sales practices. In the general insurance sector, reviews will focus more on wholesale activities and the impact on personal lines and small commercial customers who buy products provided by wholesale firms.
The FCA has provided a useful timetable of upcoming reviews and studies that will benefit firms in their planning activities for the year. These are summarised in the following tables.
The main areas in the general insurance and protection sector the FCA will look at include:
|
Area |
Details |
Start date |
End date |
|
Cover holders |
|
Q2 2014 |
Q4 2014 |
|
Premium finance |
|
Q3 2014 |
Q3 2014 |
|
Motor legal expenses insurance |
|
Q3 2014 |
Q3 2014 |
|
Commercial claims |
|
Q3 2014 |
Q1 2015 |
|
Protection of client money by small firms |
|
Q3 2014 |
Q1 2015 |
|
Mobile phone insurance |
|
Q4 2014 |
Q1 2015 |
Other relevant areas being considered in long-term savings and pensions and cross-sectors include:
|
Area |
Details |
Start date |
End date |
|
Fair treatment of long-standing customers in life insurance |
|
Q2 2014 |
Q4 2015 |
|
Governance of with-profit funds |
|
Q4 2014 |
Q3 2015 |
|
Visibility of IT resilience and risks at board level |
|
Q2 2014 |
Q1 2015 |
The fair treatment of long standing customers in life insurance will look at how people are being treated in closed funds, in particular, the level of information and service they are getting. A brief made to a national newspaper prior to information being released to the public was described as “poor handling of market sensitive information” and sent share prices of Aviva and L&G tumbling. An independent inquiry into the handling of the FCA’s announcement is being carried out. We will comment on this review, once available.
European initiatives
The FCA continues to participate in international rule making and remains focused on its work with bodies in the European bodies e.g. EIOPA. Current insurance specific initiatives on its agenda include Omnibus II and Insurance Mediation Directive II (IMD II).
Although Omnibus II has been agreed, other European activities could change given the new European Parliament in May 2014 and European Commission on November 2014.
Risks over 2014/15
Other factors may lead to changes in the FCA’s activities:
Technological advances enable to a wider range of products and services coming to the market. The FCA will need to adapt its controls and responses to account for this.
In the last month, we have seen dramatic changes to the annuity and pensions market following the Chancellor’s budget. This will impact advice given to retirees and may encourage innovative retirement income products. It is too early to say what the impact on the FCA’s activities will be but we will keep a close eye on how it develops.
You can read the FCA’s business plan in full here: http://fca.org.uk/static/documents/corporate/business-plan-2014-2015.pdf