FCAIn a “Dear CEO” letter published on 4 September 2020, the Financial Conduct Authority (FCA) has set out its supervisory strategy for insurance intermediaries in personal and commercial lines, warning of “significant risks of potential harm” within the insurance sector.

What risks have the FCA identified?

 Within the letter, Roma Pearson (Head of Retail General Insurance) sets out the key risks posed to consumers and the market, highlighting in particular the risk of consumers buying “unsuitable or poor value products”, which is being driven by “insufficient or unclear information” and “inappropriate sales tactics”.

Firms are being asked to consider the extent of these risks within their businesses and to assess whether they have strategies in place to help reduce them.

The key drivers of harm which the FCA has identified are:

  • ineffective governance and oversight of business;
  • incentive arrangements that do not support a healthy culture; and
  • business models which provide poor control over sales, renewals and conflicts of interest.

Supervision of these areas will be prioritised, and the letter further details the ways in which the FCA will assess firms on this basis.

Additional external considerations

The FCA also notes the impact of COVID-19, recognising the potential risk of firms collapsing. The letter re-iterates the FCA’s expectation for firms to plan ahead and minimise disruption in that scenario. If firms are concerned about meeting capital requirements, they are expected to contact the FCA.

In addition, the letter suggests that firms consider how the end of the implementation period for Brexit will affect them and their customers, including what action may be necessary to be ready for 1 January 2021.


Brokers should take action to address the risk areas highlighted in the letter. As part of this, firms may wish to review how they have implemented the Senior Managers & Certification Regime.

Beyond implementing robust governance and controls, the FCA expects firms to embed “healthy cultures and behaviours” in order to drive the required change to the market and to prevent harm from occurring.

The letter confirms that the FCA will be proactively monitoring firms, it will engage with firms to help them complete their key priorities, and will act where firms and individuals are not meeting its expectations.

This strategy will run until September 2021, and firms should expect to receive a further communication from the FCA next year with its updated view on the risks posed.