Simplyhealth highlights customers’ needs in FCA consultation response
Simplyhealth has highlighted the need for improved consumer protection and product affordability in its response to the Financial Conduct Authority’s (FCA's) consultation on the Financial Services Compensation Scheme (FSCS).
The FCA is consulting on changes to this scheme as many firms have seen an increase in levies since the rules were last reviewed in March 2013. The consultation invited responses on a number of issues, including the potential introduction of risk-based levies, involving an assessment of the risks posed by certain practices, and if product providers should pay an additional contribution to cover failures on the part of financial intermediaries, such as insurance brokers.
Simplyhealth’s consultation reply calls on the FCA to consider reviewing firms and their products to determine which could give rise to a consumer suffering a loss and ensuring that the contributions made by those firms are calculated on the basis of the risk they pose. It also suggests the introduction of increased conduct requirements, with mandatory risk warnings attached to unrated insurance companies so consumers are properly informed of potential risks before purchasing. The proposal for product provider contributions to cover defaulting financial intermediaries has been dismissed by Simplyhealth on the grounds that it would pose an unfair penalty on companies for whom intermediaries are a small part of their business model. This could also have a direct impact on consumers by leading to an increase in monthly premiums, compromising their ability to afford everyday health cover.
Whilst we welcomed the FCA’s consultation, it is disappointing that it did not offer scope for wider consideration of the effectiveness of the current funding model for the FSCS scheme levy. It also failed to adequately consider the implications of its proposals across the wider financial services sector, and specifically the impact on those companies selling directly to consumers.
The FCA must draw the right balance between fostering consumer confidence, ensuring consumer protection and requesting fair contributions from firms. But the current proposals risk further penalising firms selling lower risk products directly to consumers, which would compromise the affordability of products. The FCA should consider how risk-based levies can be introduced most effectively to ensure certainty across the sector, requiring those companies who sell higher risk products to pay levies relative to this risk. Product providers should not have to make contributions for claims caused by intermediaries, such as insurance brokers, when they sell directly to consumers. Before considering an indiscriminate increase in costs across the sector, the FCA should examine the limited governance requirements an unrated insurance company must meet when selling via an insurance broker to determine if there is a regulatory shortfall that needs to be addressed.
Simplyhealth has always been committed to helping people make the most of life through better everyday health. We understand that central to this is ensuring our products are affordable and accessible. Given that we have recently been hit by another IPT hike, it is disappointing that the FCA has brought forward proposals that could unjustly result in increased costs to our customers’ monthly premiums.
We hope that the FCA will give due consideration to our response. The purpose of the FSCS is to offer consumers protection, but this should not compromise their ability to afford everyday health cover.
The FCA’s consultation closed on the 31st March 2017. The FCA is currently considering responses to its consultation and plans to publish its Policy Statement later this year.