Thoughts on structuring for successful Insurance Products: The FCA’s Final Report on their Product Oversight and Governance thematic review

Contributed article: Charlotte Halkett, Senior Consultant, Milliman

The FCA published its final report on the Product Oversight and Governance thematic review for General Insurance and Pure Protection (PROD 1.4 and 4) in Aug 2024.  The focus is on requirements to ensure these financial products meet customer needs and offer fair value. The report points out how this is particularly important given the cost of living crisis.

While FCA investigations do highlight some good industry practices, there is no doubt that this strongly-worded report should be seen as an urgent call to many whom the FCA perceives to be falling short of essential product governance requirements. Critically, the report points out “real risk of harm to customers” from failure to meet obligations in this area.

To quote: “We are very disappointed to see many firms… failing to meet their regulatory obligations under PROD fully, despite our extensive previous work and the clear expectations we have set”

The report states firms must urgently address identified shortcomings and ensure compliance with PROD 4 (the relevant section of the FCA Handbook of rules and guidance – linked below). Regulatory actions may be taken against firms failing to meet obligations, including product withdrawal and customer redress. The reports points to the actions taken by the FCA around GAP insurance as an example.

Product Oversight is, at its heart, about producing and maintaining products that work well for customers. Good Product Oversight creates space and evidence for stakeholders to consider actual outcomes for customers and drive ongoing improvement. Such high standards lead to more satisfied customers and a better reputation – what’s not to love?

Done well and embedded into decision making, Product Oversight can add huge value to a business. Personally, I have found engaged Product Oversight Governance to be particularly useful to drive communication for customer-driven innovation and would encourage any business that wishes to thrive to embrace it.

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