The Financial Conduct Authority (FCA) wrote to firms across the market, including life insurance providers.
Firms are expected to put the needs of consumers first by offering good price and value, efficient support and service, and implementing effective customer journeys. Insurers are also required to support those in financial difficulty and effectively outsource their oversight.
The regulator said it had identified poor service being given to life insurance customers in recent years, such as slow transfer and claim settlement times. It said this could be connected to migrations or transformation activity on legacy business and the watchdog expected firms to make improvements in this area.
The FCA said there were instances of poor selling practices and said while incidences were resolved, insurers could act quicker.
It said firms should do their due diligence on new brokers to avoid the unnecessary re-broking of policies and prevent policies from being sold when they will not be paid out as expected.
Insurers are required to monitor brokers in their distribution channels to identify poor practice.
The FCA said these will be the priorities for insurers until 2025 and warned that it would take action against any firms not meeting expectations.
An early signal of Consumer Duty
Matt Brewis, director of insurance at the FCA, said: “This is an early signal of the work we’ll be doing under the Consumer Duty.
“Customers should be reassured that we’re in their corner and are taking action where we see poor value being provided.
“If the firms are unable to prove they’re providing fair value to their customers, they should expect further action from the regulator.”
It released this notice alongside fair value data in the insurance market.
The regulator’s data showed that in 2022, there were 194,311 mortgage payment protection policies in place and 92.24 per cent of claims had been accepted with an average pay-out of £3,833.82.
