The UK's Financial Conduct Authority (FCA) is expecting there to be "significant issues" with closed books among life insurance providers under the incoming Consumer Duty, reports International Investment's sister brand Cover.
Speaking at the Association of British Insurers' (ABI) annual conference on 21 February, Matt Brewis, head of insurance at the FCA, highlighted two key areas the regulator is currently focusing on in the run-up to the Consumer Duty's implementation.
Brewis said the FCA anticipates there will be "significant issues" for life insurance providers with large volumes of closed books.
"It's a year to deal with [closed books] but I think there is going to be some significant issues there; old terms and conditions, old approaches, legacy IT systems and how to ensure that you're applying Consumer Duty to all those old books as well," Brewis said during a panel discussion.
"These are issues that [the FCA] are going to have to deal with, that we have to work with you on. If you come up against these issues, come speak to us and we can work on these together, because there are going to be some areas where we need to make some tweaks."
Brewis' comments follow the FCA's latest round of ‘Dear CEO' letters to various sectors of the financial services markets, published earlier this month, which laid out the regulator's expectations of the insurance industry under Consumer Duty.
The letter noted that the FCA acknowledged "operational challenges" posed by the industry's volume and complexity of closed book businesses, but that firms should not "contract out their regulatory obligations" to outsourced service providers (OSPs).
The relationship between life insurance providers and OSPs was also highlighted during the ABI's panel by Brewis, who said "many" life insurers have a "heavy reliance" on these firms and that there will be a "significant amount" of items for providers to be aware of under the Duty regarding this.
"We'd like to see a greater level of progress of working together between the insurers and the outsourcers," he commented.
Overall, Brewis said preparations for the incoming Duty are going well and that, in time, it will lead to "less need for new regulation with these overarching principles and outcomes."
