Cover holder conflict of interest review also revealed in regulator’s business plan
Commercial claims handling, cover holders, premium finance sales practices and client money handling will face scrutiny by the regulator this year.
Revealing its 2014/15 business plan this morning, the FCA said: “Building on findings from current retail claims work, we will consider whether commercial customers’ expectations are met in the claims process, where poor behaviour could have a wider impact on trust in the market, as well as leading to poor customer outcomes.”
Its cover holder review will look at the distribution chains of firms that operate in wholesale markets and the impact on retail and small commercial customers.
“We propose to look into the key risks in complex distribution chains and the mixed responsibilities in them, including the cultural risks relating to product design, sales and post-sales handling. We will also aim to improve the way intermediaries identify and manage conflicts of interest,” it said.
The FCA, which tomorrow assumes responsibility for the regulation of consumer credit, will also review insurers’ and intermediaries’ sales practices and disclosures when selling premium finance to consumers alongside general insurance products.
It also plans to look at “the extent to which firms are currently holding client money without the appropriate permissions and protections”.
The scope and start dates of the market studies are yet to be finalised, but, according to the FCA’s current timetable, the work will begin with the cover holder review to run from Q2 to Q4. The premium finance review will start and end in Q3.
The commercial claims and protection of client money reviews will start at the end of Q3 and run until the start of 2015.
The FCA’s annual budget will increase by 1% to £452m. Of this, £141.5m will be funded by insurance brokers and £62.4m by insurers.
Insurance Times revealed in November that the FCA was considering thematic reviews in commercial claims, coverholder arrangements and distribution chains.