The Financial Conduct Authority (FCA) is proposing just two categories of insurance sale – advised and non-advised – as part of its consultation on simplifying insurance rules.
Current rules distinguish between a personal recommendation as defined in Article 53 of the Regulated Activities Order (RAO) and other things which may amount to ‘advice’ but would not be a personal recommendation.
The regulator is proposing to remove this latter category – meaning a firm would only be subject to the advice rules if they are providing a personal recommendation for the insurance arrangements they are selling.
Creating a clearer boundary
The FCA argued this will simplify the requirements on firms by creating a “clearer boundary” between advised and non-advised sales and limit the additional rules for advised sales purely to situations where the firm is providing advice as defined by the RAO.
This will also mean that some sales currently classed as advised will cease to be so, although the regulator added it thought these situations were rare in practice.
It is also proposing to remove the requirement for firms to disclose whether they are giving a personal recommendation or advice on the basis of a fair (and personal) analysis of the market as in its view, this is not required to help customers understand the proposed arrangements.
Existing guidance in ICOBS 4 about the use of panels to determine whether a fair analysis of the market is being undertaken will also be removed. Under proposed changes, the regulator added this guidance is no longer necessary.
Non-advised sales
On non‑advised sales, the regulator revealed it will retain the requirement to inform the customer whether the firm is providing a personal recommendation or just information and its other standards for non-advised sales will remain the same.
Sales which currently involve advice not amounting to a personal recommendation will be subject to these standards.
This includes the requirement that all contracts proposed must be consistent with the customer’s demands and needs.