The Financial Conduct Authority (FCA) has emphasised insurers must have good insight of the appointed representatives (ARs) they work with in regards to the incoming Consumer Duty.
ARs have been a key focus for the regulator over the last year and it is now turning the spotlight on insurers to make sure they are taking responsibility for the sector’s behaviour as well.
FCA director of insurance Matt Brewis told an audience of insurers at an Association of British Insurers webinar that while ARs are used across financial services, the largest number of them sit within insurance.
Brewis acknowledged that ARs act as an important means of promoting competition and ensuring customers can access services cheaply, but there are problems.
He revealed ARs account for more than 60% of the total value of claims made to the Financial Services Compensation Scheme (FSCS) and can also generate up to 400% more supervision cases and complaints than other directly authorised firms.
As a result, insurers will need to be more vigilant.
“We’re publishing new rules around this where we will be expecting them to comply with the new Consumer Duty, as well as our focus on ensuring the principals to the insurers that manage the appointed representatives have better oversight of those firms,” Brewis said.
“So, if you use appointed reps in your business model, we’re expecting you to have that good oversight to ensure they are competent and stable, delivering good outcomes for customers in line with the new Consumer Duty.”
ARs have been a key focus for the regulator since its first proposed tighter controls and greater data sharing on these firms to cut complaints and consumer harm last December.
Over the summer, the FCA revealed implementing its overhaul of ARs would cost the financial services sector around £7.6m per year.
At the time it also revealed principal firms must investigate the history of their ARs including other principal firms they worked for and why their previous relationship came to an end.
But the regulator also has rejected calls from firms for a 12-month implementation period for its new regime, with firms being given until 8 December to implement the new rules.