The Financial Conduct Authority (FCA) has warned that many insurance firms are likely to be “unprepared” to meet new enhanced rules on product governance, which come into force on 1 October 2021.
The findings come from a recent report which looked at how firms designed, sold and reviewed their products to ensure they met the needs of their customers.
It showed that despite firms making “good progress” in meeting the FCA’s existing rules and guidance, too many firms are not fully meeting the group’s standards.
These new rules are part of a wider package of remedies introduced by the FCA to tackle the loyalty penalty and ensure that firms focus on providing fair value to all their customers.
The review found weaknesses including insufficient focus on customers, outcomes and product value, including when considering value in the context of Covid-19 and shortcomings in governance and oversight of products.
Sheldon Mills, executive director for supervision, policy and competition at the FCA, said: “We know some firms are doing the right thing but with the deadline for implementing our enhanced rules less than two months away, it’s worrying that some firms may not be ready.
“Where firms are not consistently meeting existing requirements and expectations, it risks harm through poor value products or products being sold to the wrong customers. These firms have significant work to do urgently to be able to comply with the enhanced product governance rules. Firms that fail to do that work risk regulatory action.”