Out-Law News | 24 Nov 2020 | 3:48 pm | 2 min. read
The UK’s Financial Conduct Authority (FCA) has written to firms running price comparison websites (PCWs) to outline the drivers of harm in the sector and its supervisory strategy.
The FCA said some PCW firms had at times demonstrated a “poor understanding of their regulatory obligations”, and that regulatory change had been poorly implemented by PCW firms.
The regulator said it had identified five harms and drivers of harm (7 page / 212KB PDF) within the sector: consumers being sold products that did not meet their demands and needs; consumers unable to access financial services; ineffective governance arrangements and poor culture; poor operational controls; and poorly managed innovation.
Financial services and insurance law expert Juanita Morrison of Pinsent Masons, the law firm behind Out-Law, said the risks identified for PCW firms echoed the risks identified by the FCA when it wrote to insurance intermediaries and to firms in the personal and commercial lines insurer portfolio, regarding ineffective governance arrangements and poor culture, poor pricing practices and unsuitable products.
“This letter to PCWs is a further indication of the seriousness and importance of these and other issues to the regulator,” Morrison said.
“While the FCA mentions that the PCW sector has achieved a good operational response to the Covid-19 pandemic, the FCA also acknowledges that the pandemic has increased the risk that consumers may be unable to access financial services. The expectations of the FCA in respect of cyber-resilience illustrate that Covid-19 is not the only area of focus for the FCA in respect of PCWs operational controls and resilience,” Morrison said.
The FCA said PCWs must have systems and controls to absorb the shock from operational disruption, IT incidents and cyber-attacks, as well as the impact from severe but plausible events such as Covid-19. It encouraged PCWs to look at its current joint consultation on operational resilience and the proposals for firms to identify important business services, set tolerances for disruption, and act to address identified vulnerabilities.
The FCA told PCW CEOs they needed to understand the products they sold, and to give consumers appropriate information to allow them to make informed decisions about insurance policies sold through comparison websites.
The regulator said PCWs should effectively implement new rules on signposting consumers with pre-existing medical conditions towards appropriate travel insurance policies. It said PCWs were well-placed to provide information to consumers.
The FCA also said PCWs had encouraged consumers to shop around for good prices, but that had caused an increased focus on pricing within the insurance market and had potentially driven consumers to purchase products that did not always meet their needs. It asked PCWs to respond to its ongoing consultation on insurance pricing.
The FCA added that it expected PCWs to prioritise embedding a healthy, customer-centric culture, and that failings in the sector had often been due to firms not fully understanding their role as regulated intermediaries and, as a result, falling short of the regulatory requirements designed to protect consumers. The FCA reminded PCWs that they now come under the Senior Managers & Certification Regime and have until 31 March to ensure all staff in certified roles were identified and trained.“The letter gives a clear indication of the FCA’s focus in respect of PCWs between now and the end of 2022. The FCA notes potential harm to customers not only from the sale of products on PCWs, but also from developments in relation to new products and technology taking place in the PCW market. There is a clear expectation on PCWs to take a proactive approach to ensure their actions do not cause harm to customers,” Morrison said
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