UK: FCA Confirms New Ombudsman Service Award Limit (Pinsent Masons Insurance Briefing: 20 March 2019)

Last Updated: 21 March 2019
Article by Colin Read, Alexis Roberts and Nicholas Bradley

Latest fortnightly round-up of insurance, legal and business developments with analysis and commentary from the insurance team at Pinsent Masons.

The main topics we're focusing on this week are:

FCA confirms new ombudsman service award limit

Financial firms could be ordered to pay up to £350,000 in compensation by a UK ombudsman in response to complaints raised about their acts or omissions from April this year. The new award limit was confirmed by the FCA late last week after the regulator had previously carried out a consultation on the topic. The compensation can be set by the Financial Ombudsman Service (FOS). Contentious financial regulation expert Jonathan Cavill of Pinsent Masons said the FCA's decision to raise the award limit stems from its objective to ensure that markets operate well and that customers are properly protected. "The new £350,000 limit is a material increase which firms will not be able to ignore. The obvious upshot is the increased redress which may be awarded from a FOS decision. However, the more subtle consequence is the impact the increased limit will have on the way firms conduct themselves, both generally and in response to complaints." Read more...

Climate change issues 'high priority' for UK insurance regulator

Tackling the financial risk of climate change is set to be a high priority issue for UK insurers in the coming months as regulator the Prudential Regulation Authority (PRA) is expected to shortly produce a final supervisory statement and a climate change-related survey for insurers. Speaking at last week's Sustainability Summit, Rule said that the PRA's role was not to tackle climate change itself but rather to address the risks it posed to the safety and soundness of the UK financial system. However, he said that it was clear that the insurance industry was "looking for leadership and does want positive change", particularly given the "overwhelming support" for last year's draft supervisory statement on how banks and insurance companies should manage the financial risks arising from climate change. Insurance law expert Elaine Quinn of Pinsent Masons who attended the conference said that Rule's speech had been "well-received", following "a long day of interesting and illuminating presentation and discussion on the role of the finance sector in addressing the world's climate change issues". "While Rule was careful to emphasise that it is not the PRA's role to tackle the issue of climate change itself - a point that was met with some resistance within the audience - its mandate to promote the safety and soundness of firms squarely brought the issue within its agenda. In the near term, it is clear that this is a high priority issue for the regulator." Read more...

FCA welcomes investment platform progress on customer switching

UK investment platforms have made considerable progress on improving the customer switching process and helping customers to shop around since the FCA began a study of the market, the regulator has said. Insurance and wealth management expert Tobin Ashby of Pinsent Masons said that the report "overall reinforces the FCA's view from its interim report, that the market is working well and that platforms are competing well in the interests of consumers. This is good news for the platform industry, although there will of course always be room for improvement in any market and so the FCA's continued focus on competition has led to more detail on the issues it had previously highlighted. The platform market has already been making considerable progress in some of the key areas the FCA has raised, such as transfers between platforms and converting units, so much of the likely outcome of the report and consultation should be building on work that is underway. The conversion of units has raised practical issues in recent years, so it is likely to be beneficial having a consistent approach industry-wide and it will be worth platforms engaging with the consultation to ensure the proposals can work in practice." Read more...

International Women's Day: innovation depends on diversity and bold and daring action

ANALYSIS: There is a clear link between boardroom diversity and how well a business is set up for future innovation. International Women's Day should serve as a call to business leaders to assess if their company is ready to face the challenges of tomorrow's business world. Markets are evolving as society and technology changes. To ensure new products and services hit their mark, businesses will need to embrace behavioural science – broadly, the study of people as whole and their interactions – and ensure the results of behavioural science studies are interpreted and implemented by different people. Having people of varied backgrounds and perspectives in senior roles will best ensure that the needs of target markets are understood and catered for. After all, businesses that fail to address the needs of 50% of the world population risk becoming completely irrelevant. Most organisations, however, continue to lag behind on diversity despite the clear commercial benefits that are on offer and a series of initiatives aimed at shaking up the white male-dominated corporate environment. Read more...

EU and UK insurance regulators agree 'no deal' Brexit cooperation

Insurance regulators in the EU and UK have agreed 'memorandums of understanding' (MoUs) setting out how they will cooperate and exchange information with each other should the UK exit the EU without a formal withdrawal agreement. Two MoUs have been agreed, although the terms have not been made public. The first is a multilateral MoU between the UK's Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) and their counterparts in the European Economic Area (EEA), covering supervisory cooperation, enforcement and information exchange. The second is a bilateral MoU between the PRA and FCA and the European Insurance and Occupational Pensions Authority (EIOPA) on information exchange and mutual assistance. Insurance regulation expert Tobin Ashby of Pinsent Masons said: "It is good to see the pragmatic approach of the UK regulators in recent months finally starting to be supported by their EU counterparts. From the perspective of UK firms with customers in other EU states, EIOPA's recent opinion on the approach of local regulators to continuity of existing insurance business may have been a more important immediate announcement, but cooperation between regulators of the kind now agreed through these MoUs can only help overall continuity in financial services in the event of a no-deal Brexit." Read more...

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