On January 8, 2020 the Financial Conduct Authority (FCA) published a “Dear Board of Directors” letter addressing firms in the Personal & Commercial Lines Insurer (PL&CL) portfolio in order to address identifying and remedying harms.

The FCA’s view is that there are significant risks of harm that both market and individual firms need to address in the General Insurance (GI) sector overall. As a result, the FCA require PL&CL firms to deliver a step change in their culture.

Firms must:

  • prioritise their focus on conduct and consumer outcomes throughout the customer journey;
  • significantly improve their governance and operational controls including how they proactively engage with, plan for and implement all relevant regulatory changes; and
  • consider the degree to which they present risks of harm to consumers and markets and have implemented effective strategies to mitigate these risks.

The FCA’s analysis of firms’ strategies, business models, and drivers of culture has allowed it to assess when, how, and to what extent different types may arise. Based on this analysis, the FCA will prioritise work in the following areas:

  • poor oversight of, and poor remuneration practice in, distribution chains;
  • risk of consumers being provided with unsuitable or poor value products;
  • poor pricing practices;
  • ineffective management of some regulatory change; and
  • poor operational controls.


The UK government has committed to the UK leaving the EU with a Withdrawal Agreement on January 31, 2020. If that happens, we will enter an implementation period during which the UK will negotiate its future relationship with the EU – this will last until December 31, 2020. During this time EU law would continue to apply in the UK and passporting would continue. The FCA expects firms to consider how the end of the implementation period will affects them and their customers, as well as what action firms will need to take to be ready for January 1, 2021.

Next steps

The FCA will continue to engage with PL&CL insurers in 2020 through their planned programme of work. An update will be provided in early 2021 of the key risks firms in this portfolio pose, the extent to which these are being mitigated, and the FCA’s updated supervisory plans as a result.

Our view

The issues raised by the FCA are not new. In the light of this letter firms should expect careful scrutiny of outsourcing, distribution chains and the measurement of customer value. There are likely to be some firms whose failure to take the regulator’s conduct concerns into account will result in fines and perhaps sanctions against individuals.

View: FCA publish “Dear Board of Directors” letter to firms in the Personal & Commercial Lines Insurer portfolio regarding identifying and remedying harms