The Role of the Financial Conduct Authority in Insurance

The Financial Conduct Authority (FCA) regulates the UK financial services sector in order to preserve the interests of consumers. This replaces part of the role previously performed by the Financial Services Authority (FSA) that ceased to exist. The balance of services the FSA previously provided are now in the remit of the Prudential Regulation Authority (PRA).

The Main Duties of the Financial Conduct Authority

The FCA exists to (a) protect consumers to a reasonable extent, (b) improve the honesty and reliability of financial service providers including insurance brokers, and (c) encourage internal competition so customers get the best deals possible. The Financial Conduct Authority promotes these objectives in three different ways:

  • Authorization: Providers wishing to register with the FCA must meet its high standards in regards to key terms of key staff, business plans, and control systems it approves.
  • Supervision: The FCA performs an oversight function to check the provider’s plans work in practice, that it treats its customers fairly, and displays good governance.
  • Enforcement: As it deems fit, the Financial Conduct Authority may also exercise wide-ranging sanctions against providers and employees that do not perform.

The Sanctions Open to the FCA for Enforcement

Most insurers, insurance brokers and other financial service providers willing follow the Financial Conduct Authority’s program. They do so because it is the industry standard for inter-broker collaboration and lead placement partner agreements. Moreover, British consumers know to check their insurance brokers for current certificates.

The Financial Conduct Authority is far from being a ‘toothless department”. Among others, it can withdraw its endorsements, suspend individuals and companies, and impose financial penalties. It also has the power to ‘name and shame’ offenders when it begins prosecution, and publish its decisions in the media.

Thus, when a consumer engages an insurance broker with FCA endorsement, they know they have a guardian angel to whom they can turn to for help if and when the need arises.

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