Regulatory pipeline 2023 and beyond – the Regulatory Initiatives Grid
The FCA recently published the fourth edition of its annual overview and plan for ongoing and upcoming regulatory initiatives (143 in total!)
The purpose of the Regulatory Initiative Grid is to provide an outline of the pipeline of work proposed by a number of the UK's regulators.
The Grid is broken down into sector areas (such as banking, credit and lending, pensions, and multi-sector work such as Environmental, Social and Governance initiatives). There is also a handy Dashboard which allows you to drill down and filter the initiatives by sector, regulator and whether an initiative is a new entry this year.
In this note, we outline a few initiatives which may affect the insurance market. Look out for upcoming commentary from Whitney Simpson on initiatives in the consumer credit and payments sectors too.
- Evaluation of General Insurance (GI) Pricing Intervention – a post impact assessment and data collection is planned for 2024 and 2025 to the GI Pricing Practice rules which came into force in 2021/2022.
- Cost of Living – following the FCA consultation on guidance in respect of supporting customers in financial difficulty (earlier this year), the FCA will shortly be publishing guidance to come into effect in July of this year.
- Consumer Duty – a key current focus for the insurance market, the new Consumer duty rules will come into force for live products at the end of July 2023 and for closed products by the end of July 2024.
- Update to financial promotions regime – a possibly significant change for insurers and brokers working with unregulated introducers and connected contract providers. The FCA and HM Treasury are proposing to establish a new regulatory gateway for authorised firms to pass through before it is able to approve financial promotions of unauthorised firms.
- Appointed Representatives (ARs) – the appointed representative regime underwent changes last year relating to how ARs are appointed and monitored. It appears that there will be continued focus on this by the HM Treasury on the overall aim, benefits and risks of the regime.
- Overseas Framework – with a possible impact on insurance distribution models, HM Treasury is looking at the UK overseas framework including how the overseas person exclusion operates. Bearing in mind the Government's proposed secondary objective for regulators to facilitate the growth and competitiveness of the UK economy (as proposed in the new Financial Services and Markets Bill), there may be some significant changes (and possible relaxation of the rules?) on how the overseas framework operates to seek to invite more business into the UK.
- Post-implementation review of Financial Ombudsman (FOS) SME rules – In 2018, the FCA granted SMEs the right to refer complaints to the FOS and at the time suggested that it expected to carry out a post-implementation review of this extension of eligibility by 2021. Since 2018, initial SME case volumes were low but are now steadily increasing as awareness of the ability to bring complaints increases. Given that the scope of the Consumer Duty rules includes most SMEs for insurance business and the impact of the Consumer Duty will increase the level of protection for SMEs (and consumers), we expect a continued uptick in the complaints to the FOS from SME insureds (as well as an uptick in decisions finding in their favour).
- Operational resilience and third party oversight – there are a number of ongoing initiatives by the Bank of England, FCA, and PRA on these areas including a proposed consultation on incident and third party reporting of operational incidents.
- PRA solvency work – coined the Holistic Framework, there are a number of PRA led initiatives relating to the monitoring of insurers and their liquidity, resolution and recovery plans. This is in addition to a PRA and HM Treasury consultation and possible changes to legislation relating to the reform of Solvency II.
If you would like to find out more about any of these regulatory initiatives, please get in touch.