The FCA recently released its findings following an investigation into the oversight of appointed representatives in the general insurance sector, and the results were very critical of British insurers.
As reported by Insurance Business UK,
the FCA found more than half of the 15 sampled firms were unable to show there were able to manage the risks presented by appointed representatives. It reportedly found evidence of mis-selling, and took ‘early intervention’ action against five of the regulated firms. Two were even asked to cease sales.
“General insurance is a large and important sector and we are concerned about the potential for customer detriment arising from the lack of oversight of appointed representatives,” said Jonathan Davidson, director of supervision for retail and authorisation at the FCA in a statement at the time. “All principal firms need to consider these findings and look again at their practices.”
The question is now about what steps insurers and brokers should be taking following these findings.
Charles Portsmouth, partner at Moore Stephens said the report does not not make for comfortable reading.
“Only a small sample was considered in the review but if findings are extrapolated across the sector there seems to be a major and widespread issue,” he said.
“Compliance officers at principal firms should be taking action now to ensure they have appropriate and effective risk management and control frameworks to identify and manage the risks arising from their appointed representatives’ activities.”
Portsmouth suggested the following six steps compliance officers should be taking in response to the report:
1. Ensure they understand the activities being carried out on their behalf by their appointed representatives.
2. Ensure that they are monitoring those activities through an effective risk-based and timely compliance monitoring programme.
3. Ensure that they have the appropriate resources devoted to carrying out that programme.
4. Assess the contractual arrangements
5. Make sure the appropriate regulatory permissions for approved persons are correct.
6. Ensure authorised representatives themselves have the appropriate controls in place to report on their activities particularly in respect of the conduct risk inherent in the activities.
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