The FCA’s Product Oversight and Governance Thematic Review
The FCA’s Thematic Review (TR24/2) assesses whether firms in the General Insurance (GI) and Pure Protection (PP) sectors are meeting their obligations under PROD 4, introduced in 2021 and reinforced by Consumer Duty. The Review analyses information from insurance manufacturers and distributors product oversight and governance arrangements and emphasises the critical role of the Consumer Duty in ensuring that firms deliver good outcomes for customers.
Product Governance Obligations
Under PROD 4 of the FCA Handbook, firms involved in manufacturing and distributing general insurance (GI) and pure protection (PP) products must meet several product governance obligations and ensure that customers consistently get fair value and good outcomes from the products and services they manufacture and distribute.
These obligations include, amongst other things:
- Having a documented product approval process to ensure products are designed to meet the needs of identified target markets and provide fair value;
- Regularly assessing fair value;
- Continuously monitoring products to ensure they continue to meet customer needs;
- Define and document the target market for each product in sufficient granularity;
- Distribution Oversight;
- Clear agreements outlining roles and responsibilities where multiple firms are involved in the product’s manufacture;
- Taking prompt action if they identify that a product is not delivering fair value or is causing harm to customers; and
- Maintaining comprehensive records of all aspects of product governance, including product approval, fair-value assessments, monitoring, and decision-making processes, to demonstrate compliance with regulatory requirements.
Firms under scope of TR24/2
The Review concerns all manufacturers and distributors of:
- General Insurance products (excluding contracts of large risks and reinsurance)
- Pure Protection products
However, product manufacturers and distributors in other sectors of the UK financial services industry are advised to consider the review since it is closely aligned with two Consumer Duty outcomes: price and value, and products and services.
Key Findings outlined in the Review
The TR24/2 report includes several key findings for both manufacturers and distributors. Through these findings, the FCA aims to highlight remedial actions for firms to consider, in order to ensure that customers receive fair value and good outcomes.
For manufacturers:
- Whilst most manufacturers had taken some sort of action regarding their product oversight and governance arrangements, there were significant shortcomings in how firms applied these arrangements.
- Firms also showed gaps in evidencing that their products are delivering fair value and good outcomes to consumer.
For distributors:
- Whilst some firms have shown that actions have been taken to strengthen their governance and oversight of their product distribution arrangements, other distributors have displayed significant deficiencies in these areas.
- Most firms showed a limited understanding of the distribution strategies in place and a lack of sufficient information from the product manufacturers.
Following these findings, the FCA has urged firms to take action and meet their regulatory obligations, including:
- Aligning their governance frameworks with the FCA’s expectations under the Consumer Duty;
- Conducting regular reviews and maintain robust governance controls which are essential to meet regulatory requirements; and
- Acting promptly to address any shortcomings, and consider appropriate remediation and redress actions, ensuring fair outcomes for all customers.
How Complyport can help
Governance arrangements and internal policies are key elements in developing an appropriate compliance framework. Regular reviews and monitoring are essential in delivering fair value and good outcomes to your company’s customers. Complyport’s specialised team can ensure your company meets the latest regulatory standards and best practices. The services we offer include:
- Compliance Health-checks
- Governance & Conduct Audit services
- Product Governance Framework Review
- Consumer Duty Implementation Review
- Consumer Duty Monitoring
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