In September 2020, FCA released its final market study report into GI pricing practices.  Alongside this, it also released a consultation paper which AMI plan to respond to.

A policy statement is expected in Q2 2021, with implementation expected four months thereafter.

Why does the FCA want to intervene in this market?

This forms part of a large piece of competition work.  The FCA’s main aims are to ensure transparency over price, make competition work better, provide long term fair value for all consumers in the future and improve trust in these markets.

It also wants consumers to be able to make informed product choices and expects that consumers should not be exploited or targeted with poor value products.

How does this affect AMI members?

AMI wanted to make firms aware of the FCA’s proposals now, especially as the original scope of some remedies were to apply to GI only but has, in areas, been extended to pure protection.  However, AMI will issue further member communications with more detailed guidance once the policy statement has been issued in Q2 2021.

A large proportion of the proposals will impact insurers and product manufacturers.  However, there are areas that will affect intermediaries although much of this will expand on existing guidance and requirements or change the way that information will need to be provided to consumers.  There may also be additional information requested by product manufacturers and, if within scope of the reporting requirements, there may be data that intermediaries have to supply to the FCA.

Intermediaries involved in the markets affected by these proposals should familiarise themselves with the concept of fair value, as this is an integral part of the consultation and proposed FCA Handbook changes.  FCA define fair value as ‘where there is a reasonable relationship between the overall cost to the end customer and the quality of the products and services’.

Some of the proposed remedies may present opportunities for mortgage intermediaries in the GI market.  For example, price comparison websites (PCWs) may be unable to price new business as aggressively given that it will be linked to a renewal price and this may reduce PCWs market share.

FCA has also said that it will take into account what it has learnt from this market study when considering similar issues in other markets.

The proposals

To view the proposals (including who they apply to and the types of products within scope) please click here.