FCA publishes its expectations of life insurers in relation to the cost of living

On 14th December the FCA sent a Dear CEO Letter to life insurers setting out its expectations in relation to the cost of living.

The FCA emphasises the importance of life insurers meeting the standards it expects to support customers at this time, including those in financial difficulty.  Consistent with the Consumer Duty the FCA expects that life insurers consider how they act to deliver good outcomes via their customer propositions in the changing economic environment.

The letter sets out the FCA's expectations of life insurers.  In summary these include: 

• Protection products: FCA expects life insurers to ensure customers are provided with appropriate product information during all stages of communication and to make customers aware of the options available to them if they have difficulty paying premiums.
• Pensions, long-term savings and retirement income: FCA expects firms to take reasonable steps to make customers aware of their options and the consequences of accessing and stopping or reducing contributions to pensions and long-term savings, as well as highlighting to customers the potential risks associated with their chosen investment or drawdown strategies. 
• Customer value: Firms have told FCA that they expect heightened demand for annuity products due to the significant increase in rates over this year and potentially for equity release / lifetime mortgage products among older consumers. FCA expects firms to ensure that these propositions offer fair value to customers, particularly when lending on a long-term fixed rate in a higher interest rate environment.
• Customer support: Firms should be supporting customers showing signs of financial difficulty or struggling with debt. This should involve consideration of FCA's Covid insurance and premium finance guidance and  considering the needs of those with characteristics of vulnerability. 
• Scams: FCA believes an increasing number of consumers are vulnerable to scams. Life insurers should ensure anti-scam communications are used to protect customers where possible. 
• Operational resilience: Life insurers should also consider what affect the rising cost of living will have on their operational resilience, including supporting their staff and effectively managing third party providers to reduce the risk of operational disruption.

The government have announced further support for consumers and businesses on energy costs and through other measures. However, there will still be challenges for many of your customers and life insurers have a critical role to play in helping them.

https://www.fca.org.uk/publication/correspondence/dear-ceo-letter-expectations-life-insurers-cost-of-living.pdf