FCA has published finalised guidance (FCA FG16/8) on actions life insurance firms should be taking in order to treat their closed-book customers fairly, calling for more transparency. This follows a thematic report issued by the FCA (TR16/2) setting out its findings from a thematic review of the fair treatment long-standing customers in the life insurance sector - the FCA said it found a mixed picture with most firms demonstrating good practice in one or more areas and poor practice in other areas.
The guidance states “firms should not rely just on Terms and Conditions to defend outcomes that are unfair under the regulator’s “Principles for Businesses”. They should consider additional actions to improve outcomes and/or satisfy legally enforceable customer expectations from communications made at the time the customer signed up to the policy. Firms are being told they must review and make any changes necessary within three months from the publication of the guidance – by 9 March 2017.
The guidance also states that closed-book customers should receive clear and timely communications about policy features at regular intervals and at key points in the product life cycle, so that they can make informed decisions. The communications should include information about the performance of the product, its value, and the impact of fees and charges. Customers should be pointed towards the availability of advice, be provided with enough notice of the date by which a decision is needed and also provided with alternative options to incurring an exit charge.
Providers are being told they must make sure closed-book customers are able to move in a fair and reasonable manner from products that are no longer meeting their needs.
The regulator has stated that products should be reviewed at least every five years, but it should be borne in mind that there could be instances where an ad-hoc review is needed, such as the introduction of pension freedoms.
OAC is able to undertake reviews and advise in this area if you have any concerns.
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Senior Regulatory Compliance Consultant
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