Context
The FCA has published a statement about firms working together to manufacture products or services, reminding firms that the Consumer Duty sets rules for firms manufacturing products or services. Discussions with firms show that some have difficulty applying the rules when working together to manufacture a product or service. In some cases, they are finding it difficult to decide which firms are subject to the rules, or to understand the impact on their dealings with each other. For general insurance, the position is perhaps clearer in that the relevant Rules and Guidance are to be found in PROD 4, which is more prescriptive than the Consumer Duty requirements.
Key points to note and next actions
- Although Consumer-Duty focused, the FCA’s planned work in this regard will help general insurance firms to understand the FCA’s thinking in relation to co-manufacturing. For example, the FCA is considering changes to make clear when and how firms can rely on each other when they work together in distribution chains.
- The FCA explains that distinct considerations apply to the insurance sector, where manufacturers are subject to PROD 4. The FCA is introducing separate changes to the insurance manufacturer rules, and this statement doesn’t relate to its expectations under PROD 4. The rules in PROD 4 are designed to address specific risks the FCA identified in distribution chains for non-investment insurance products.
- The statement includes commentary on four key areas – decision-making, allocation of responsibility, liability, and outsourcing.