FCA action on GI distribution chains
Written on 18/04/2019

On 10 April 2019, the FCA published work on general insurance (GI) distribution chains.

FCA is on a mission to ensure that (only) high quality, good value insurance products (always) meets the needs of your clients.

Thematic review report(TR19/2)

TR19/2 is the culmination of two simultaneous but separate reviews:

  • A review of value in the GI distribution chain (VITDC). In this 2017/18 review, the FCA looked at travel, tradesman, guaranteed asset protection (GAP) and motor ancillary insurance. 
  • A review of delegated authority (DA) arrangements. With this review, the FCA assessed activities to other parties under DA arrangements.  FCA considered risk management and control frameworks used to mitigate the risks highlighted by their 2015 review.

GI distribution chains have become long and complex. And distribution chains are potentially subject to significant influence from parties that are not authorised firms, such as retailing groups whose main business is unregulated.

The key risk the FCA say is that the more people involved in the chain, the higher the price of the GI product, and the more complex the end result (including claims and complaint handling).

The FCA is concerned about these risks because of their potential to cause harm to customers, particularly personal lines and small and medium-sized entity (SME) customers.  A lot of these issues came to light in the recent fine against Carphone Warehouse.

FCA say….

  1. Customers buying products that deliver little benefit (mobile phone insurance). 
  2. Customers are buying the wrong product.
  3. Customers are paying substantially more for a product that delivers no additional benefits compared to alternative, less expensive products available in the market, due to conflicts of interest and too many parties involved.
  4. Firms may fail to identify problems with products due to shortcomings in oversight, management information (MI) or monitoring.

The FCA point out the obvious that needed to be stated:  where multiple parties are involved, the risks of these harms occurring is significantly greater.

What does the regulator want?

The FCA wants more focus on customer outcomes, including the value of the products and services their customers receive.  The part that IFAC play in all this is helping  you to show the value of your product.  This means creating for you business plans, risk reward matrix and customer outcome statements. 

Generally, FCA  expects all GI firms to put customers at the heart of their business models and have appropriate regard for the value customers receive from the GI products they manufacture and distribute. 

Guidance consultation

As indicated above, alongside TR19/2 the FCA has published a guidance consultation on the GI distribution chain (GC19/2). 

The aim of the proposed guidance is to set out the FCA's view of how GI firms should consider value when complying with the requirements on the manufacture and distribution of insurance products. The key points are:

  • All firms in the distribution chain have an obligation to act fairly, honestly and professionally in accordance with the best interests of the customer (the "customer's best interests rule").
  • Value is an important consideration for firms when designing products, determining distribution strategies and setting their remuneration structures.
  • With the introduction of the senior managers and certification regime (SM&CR), the FCA expects there to be clear lines of individual accountability within all firms for each of the expectations and related activities detailed in the guidance.

Dear CEO letter

Alongside TR19/2 and GC19/2, the FCA has also published a Dear CEO letter sharing its findings and expectations with GI firms, and calling on them to act immediately to identify and mitigate any shortcomings.


This is a big moment for GI, and brings the market much closer to the tight regulation seen inside the investment world post credit crunch.  And if that is anything to go by, this GI initiative is just the start of a very, very long journey that will impact all parties and force change.    

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