Group risk, health insurance and employee benefits not covered by Consumer Duty

The provision and servicing of group risk, group health insurance and other workplace benefit schemes is not covered by Consumer Duty rules, the Financial Conduct Authority (FCA) has confirmed.

However small and medium enterprise (SME) product provision and services may come under the scope of the rules for the retail market.

The regulator confirmed the position as it announced the Consumer Duty rules and made response to comments from its previous consultation on the subject in December.

That consultation proposed the duty would apply to all firms in the distribution chain that can “influence material aspects of the design, target market or performance of a retail financial services product or service, even where they did not have a direct relationship with the retail customer”.

But respondents questioned whether that meant the duty applied to group general insurance and pure protection products arranged, for example, for an employer to provide benefits to employees.

The regulator has now confirmed that it does not apply to the distribution of group insurance policies or the extension of the policy to new members.

“For insurance, the scope follows the position in the Insurance Conduct of Business Sourcebook (ICOBS),” the FCA said.

“The duty does not apply to reinsurance, contracts of large risk sold to commercial customers or other contracts of large risk where the risk is located outside the UK.

“Nor does it apply to activities connected to the distribution of group insurance policies or the extension of these policies to new members,” it added.

However, the regulator noted that products and services for small and medium enterprises (SMEs) may come under the Consumer Duty.

“Where we already regulate and apply protections to the provision of financial services to SMEs, the duty applies to firms dealing with them, in line with the approach in existing sourcebooks,” it said.

 

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