UK insurers/brokers could be in for shock collision with refashioned regulator, advisory warns
2022 will go down as the year of discovery for “what the new assertive FCA looks like,” key analysts and associates at financial services risk and regulatory advisory Sicsic have argued.
The new year brings “high and continuous level of regulatory change” of a quality and depth to deliver “strategy challenges that transform business models,” managing director Michael Sicsic (pictured) told a webinar Tuesday, February 1.
“And all that in the context of a more assertive, data-hungry regulator.”
Pending or current regulatory action on consumer duty, fair pricing, product governance as well as operational resilience will all go well beyond the traditional rubber-stamping of rules and procedures, often forcing a radical rethinking of business practices towards ensuring client outcomes.
The industry approach to consumer duty regulation, due to be ironed out for an end-July target date, may give best demonstration how the industry underestimates challenges and impact. “A lot of firms have put it on the shelf,” senior advisor Hugh Savill said of his take on industry preparations.
Savill argued that complaints that the FCA is “not being clear enough” are not only accurate, but also accurately represent the regulator’s intentions. In a principle-based regime focused on customer outcomes, the industry has to work early to plot its own most sensible path, not just wait to receive a rulebook for implementation.
Even the UK’s fair-value retail pricing scheme, fully in place, highly publicised and seemingly well-understood, is underestimated for the size and scope of the continuing regulatory obligations, associate director Nindy Mellett said. Few in the market appear to grasp the breadth of the attestations due in March or the data due in September, she suggested.
On operational resilience, even 18 months of rough familiarity with new guidelines have failed to scare the industry into action to alter strategy “from a functional silo-based view to an end-to-end view” focused on customer rights, partner James Maxwell said.
“There is ground to be made up and that is a focus,” he said. Intermediaries appear “a bit behind” insurers in preparations. The larger brokers are likely to be targeted by regulators on the matter early.
Trip-ups to watch for: 1) Industry consolidation could accelerate requirements for some fast-growing consolidators vis-à-vis start-off transition thresholds, 2) misunderstandings over third-party outsourcing rules and difficulties in securing data from providers could bottleneck the process; 3) disclosure deadlines loom and 4) excess faith by small players that a regulatory sense of ‘proportionality’ will earn them a wink could land them afoul of a full-scale review of their capacity to do “intolerable harm to customers.”
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