Final Rules for Life Insurers and Intermediaries' Pure Protection ProductsLife insurance
01 June 2021
On 28th May, the FCA published PS 21/5: General insurance pricing practices market study. This policy statement follows on from an earlier consultation paper, CP20/19. As we noted in our recent comments, despite the title, this is relevant to life insurers and intermediaries selling pure protection business.
There are no significant changes in content, and we welcome the clarification that, “within one year of the product governance rules coming into effect [confirmed as 1st October 2021], firms are required to have applied a product approval process to any existing products that did not fall within the current PROD scope, and to update their approval for any in-scope products to take into account the new requirements on fair value.”
A helpful guidance detail, introduced in the policy statement, is the ability to group similar products together for purposes of the review.
Alongside the new application of the FCA’s product governance rules to “legacy non-investment insurance products”, PROD 4 will now detail what a firm must consider when assessing the value of the product, including the impact of distribution arrangements, and the expected information necessary to make this assessment – i.e. it should be of good quality and from internal and external sources as appropriate.
David Gray, Senior Consultant at OAC commented, 'With a regular stream of publications to filter and digest, there is a possibility that these publications (titled as "general insurance") have flown under the radar of life insurers. However, with an effective date of October 2021 and evidenced implementation required by October 2022, it is important that life insurers carefully review the policy statement, assess the extent to which their protection business (including closed books) is impacted and prioritise plans accordingly.'
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