Welcome to the UKGI weekly regulation update service for Aviva ABC brokers

Context

The FCA has updated its fee tariff data reporting web page to include links to replacement guidance documents in relation to reporting fee tariff data (i.e., FCA, FSCS and FOS tariff data reporting) for 2025/26.  There are updated documents in relation to general insurance distribution, funeral plans, and an updated web page in relation to consumer credit income reporting.

Key points to note and next actions

• For general insurance distribution, the guidance for reporting FOS fees income remains unchanged.  The guidance remains that, for firms’ next FOS tariff data reporting (so for the FCA’s 2025/26 fees year), income from consumers only is required.
• From 2026/27, though, firms will likely need to report income from all customers eligible to refer a complaint to FOS (this is subject to a current Consultation).   Until the FCA publishes a Policy Statement (expected April this year) in relation to the change to reporting FOS income, firms will not know for certain which data they will need to capture to enable the new reporting.  As soon as the Policy Statement is published, we will update clients accordingly.  It is likely that the new data, though, will need to be gathered for the whole of 2025.
• The consumer credit income reporting web page confirms the updated guidance and requirement for reporting a ‘proxy measure’ of income; the link to the Bank of England base rate has been removed, with the proxy income measure for credit broking now being 5% of the amount of credit arranged

Context

The FCA has published a web page titled ‘Redress liabilities: an update for firms’ about what firms should and should not do to tackle polluting behaviour and meet their redress liabilities.

Polluter behaviour occurs when a firm or individual takes steps that leave behind potential or actual redress liabilities generated in the course of their regulated activities. Although more directly aimed at financial advice businesses, there are messages within the information on the web page that is relevant to all firms.

Key points to note and next actions

‘Polluter behaviour’ is especially damaging for retail consumers who are unable to seek appropriate redress from the firm whose actions caused them loss.  Consumers become reliant on the FSCS (where available), which often means they may not receive the full amount owed. It undermines trust in the financial system and the reputation of the industry.  Another other impact is the rising cost of the FSCS levy, which impacts firms across the market. Polluter behaviour means the entire industry pays for the poor conduct of a small group of firms and that’s not fair on those firms that do play by the rules

• Under the heading ‘Why the polluter should pay’ the FCA sets out its expectations of what firms should and should not do, many of which can be applied to firms which maybe in an organised wind down rather than attempting to avoid redress liabilities.
• Under the heading ‘What to expect from the FCA if you are in this situation’, the FCA reminds firms that, under the Consumer Duty, they must act in good faith, avoid causing foreseeable harm, and enable and support retail customers to pursue their financial objectives.

The FCA sets out examples of actions it might take, including commentary on requests to take further action; taking responsibility for advice, products and services; Voluntary Requirements (VREQs); and firms selling client banks.

Context

The FCA’s Cost Benefit Analysis Panel has published its Interim Annual Report covering the period May to September 2024, its first five months of operation.  This first report sets out the background to the use of cost benefit analysis (CBA) as a standard tool used globally to ensure that policy making is evidence-based, proportionate, and accountable to stakeholders.

Key points to note and next actions

• CBA has been a central part of FCA and PSR policy making for many years.
• Independent, expert bodies that provide feedback on policy making prior to public consultation are a central element of the UK’s public policy architecture.
• The CBA Panel exists to provide such independent, expert review and advice on the FCA’s and PSR’s CBA of proposed policies.
• The report outlines the FCA CBAP’s statutory basis and obligations, and its principles of operation.
• Three main recommendations in relation to the FCA’s use of CBA are deliberately limited and are to be treated as provisional in view of the fact that the Panel has been in operation for less than six months.  Those recommendations are:
  • Using CBA at earlier and later stages of the FCA’s policy development cycle
  • Expanding the scope of CBA in the FCA’s appraisal of proposed policy
  • Clarifying how the FCA’s use of CBA relates to its statutory objectives

Context

The FSCS Interim Chief Executive, Martin Beauchamp, has published the latest FSCS Budget Update which focuses on the FSCS management expenses, and its plans for April 2025 to March 2026.  In relation to the management levy, you can find the full 2025/26 levy forecast, including the compensation FSCS expects to pay over the year, in last November’s FSCS Outlook. The FSCS will provide its next full levy update in the spring.

Key points to note and next actions

• For 2024/25 FSCS remains on track to be within the management expenses budget of £103.1m.  The FCA has recently consulted on the FSCS Management Expenses Levy Limit for 2025/26, which is £108.6m, which includes a £5m unlevied reserve on top of the core budget. This reserve is the same as the 2024/25 financial year.
• The majority of the FSCS budget covers claims-handling decisions by 18% year-on-year and maintained its high customer satisfaction and quality scores.
• During the first half of 2024/25, FSCS increased claims decisions by 18% year-on-year and maintained its high customer satisfaction and quality scores.
• Next year FSCS comes to the end of its three-year plan to build its in-house claims-handling capability. This major change to its operating model has given FSCS greater control and flexibility to handle the variety of claims it receives
• In 2025/26 FSCS will keep the level of investment the same as in this financial year. This will enable it to build on the existing positive changes, to lay the foundations for future advice claims transformation and deliver further enhancements to depositor protection
• Most of the components of the FSCS annual management expenses are expected to fall, other than for staff costs (including contractors), facilities, IT and overheads

Context

The CMA has published its draft Annual Plan for 2025 to 2026 under a banner of “Promoting Competition and Protecting Consumers to Drive Growth, Opportunity, and Prosperity for the UK”.  This statement underpins the CMA’s medium-term priorities and its areas of focus.

Key points to note and next actions

The medium-term priorities are:

• People can be confident they are getting great choices and fair deals.
• Competitive, fair-dealing businesses can innovate and thrive.
• The whole UK economy can grow productively and sustainably.

Areas of focus to support these priorities include:

• Implement the new digital markets competition regime
• Act in areas such as drip and dynamic pricing, travel and housing, and in areas where the CMA has previously set expectations for responsible businesses.  Evidence of CMA work of this nature is the actions it took against two insurance firms in not meeting the requirements of the CMA’s Private Motor Insurance Order in relation to no claims discount disclosure.
• Complete existing competition investigations.
• Encourage customer choice, investment, and sustained innovation through fair, open, effective competition in emergent markets.

The Plan also includes commentary on how the CMA decides when and where to act, and evolving the way it works.

Context

New data published by the CII reveals that consumers continue to believe that insurers could do more to build trust, particularly by focusing on loyalty.  Overall consumer satisfaction with insurers fell to 84% in the last quarter of 2024, down from 86% a year earlier. Within that number, just 14% reported being extremely satisfied, the lowest reported level since the Index began in 2019.

Key points to note and next actions

The key actions consumers said firms could take to build trust included:

• Offering discounts for customers who stay with the same company and recognising customer loyalty at renewal after a claim.
• Ensuring premiums do not increase simply because a customer is no longer new, and providing additional benefits at renewal, such as enhanced coverage.
• Handling complaints in a professional and fair manner.

On a more positive note, the Index shows that the gap between consumer expectations and perceived insurance firm performance around handling claims has improved for a fourth consecutive survey.

SMEs reported more positive performance ratings compared to the previous wave, and overall satisfaction rose to 83%.  However, in contrast to the consumer research, SMEs say that improvements are required across a broader range of themes to increase their trust, including:

• Offering discounts for SMEs who stay with the same company
• Assessing SMEs’ risk individually, rather than using generic assumptions
• Answering SMEs’ questions quickly and clearly
• Taking loyalty into account when calculating renewal quotes following a claim
• Ensuring policy documents are easy to read with little or no small print

Context

BIBA has launched its 2025 Manifesto, titled “Partnering to deliver value”, at an event at the House of Commons attended by the Economic Secretary to the Treasurer (the ‘City Minister’) Emma Reynolds.

Key points to note and next actions

• The Manifesto sets out the importance of collaboration to achieve the Government’s growth mission and to address the challenges faced by insurance brokers and customers.
• Within the Manifesto, BIBA sets out a new six-point plan to achieve a more proportionate regulatory environment, which calls for the removal of unnecessary FCA rules now the Consumer Duty is in place, reform of the product value/fair value assessment requirements, reducing the scope of the Consumer Duty by removing larger commercial clients, streamlining reporting requirements, speeding up authorisations and the need for international comparison metrics for the regulator.
• This was supported by the City Minister, who backed BIBA’s calls for more proportionate regulation, saying that she knows that regulation is an “issue very close to all of your hearts”.
• The Manifesto includes a broad range of issues, calls to action and commitments including some long standing and ongoing issues such as flood, cyber insurance, skills, access to insurance and capacity challenges.  
• There are a number of new campaigning issues identified for the first time this year, including differential pricing, permitted insurance payments under the Leasehold and Freehold Reform Act, participation in the Motor Insurance Taskforce and premium finance.
• There is also new research published from WPI Economics highlighting that if IPT were to increase that not only would households and businesses cut insurance levels, but 40% of businesses state they would have to pass on the cost to customers. The research also called IPT a ‘tax on growth’, as 30% of businesses surveyed said an increase to IPT would decrease business investment.

Context

The LMA has published an insights article on why policy wordings matter, in particular revising UK personal accident wording to boost consumer accessibility and how the changes made to it aim to boost consumer understanding.

Key points to note and next actions

• The LMA is taking proactive steps to produce model wordings that are suitable for consumers. This project involves updating several existing LMA model policy wordings to ensure that the policy language is clear and the cover is presented in a consumer-friendly format.
• The LMA has published a new model UK Consumer Personal Accident Policy, and is working with external designers to produce an interactive pdf version which will soon be available on the Lloyd’s Wordings Repository. 
• Any new model consumer policy wordings published by the LMA will be made available as an interactive pdf format.
• Several key stakeholders and subject-matter experts have been involved in the process of drafting LMA3177 since June 2023. The LMA has worked with a subgroup of the Personal Accident Business Panel, medical practitioners and consumer wordings specialists to ensure that the new model policy meets the needs of underwriters and consumers. 
• Simplicity and clarity were the guiding principles for the update to the LMA’s model personal accident wording, which resulted in a completely new wording.