How to comply with new FCA guidance on fair treatment


Today, the Financial Conduct Authority released its finalised guidance into fair treatment of long-standing customers in the life insurance sector.

The guidance comes on the back of the regulator’s thematic review of the industry. The review looked in particular at how firms treat their ‘closed book’ customers – those long-standing customers who have policies that are closed to new business.

This is in line with priorities set out in the Authority’s 2016-17 Business Plan, which highlighted the ‘treatment of existing customers’ as a focus.

What did the thematic review conclude?

The review showed ‘a mixed picture with most firms demonstrating good practice in one or more areas and poor practice in other areas’. Our blog detailing the findings can be read here.

As a result of its findings, the Authority proposed updates to its non-Handbook guidance. The updates are aimed at improving firms’ behaviour ‘in order to drive better outcomes for customers’.

These ‘better outcomes’ are one of the regulator’s core objectives. In this blog we look at what the FCA is looking for in terms of outcomes and how they can be achieved.

What does the new guidance say?

The finalised guidance sets out the Authority’s expectations around the actions life insurance firms should take in order to ensure they are treating their closed-book customers fairly. It takes into account feedback the regulator solicited from providers following the review’s publication.

In general, the proposals consulted on have made it into the guidance, although there were some changes in response to the feedback.

Who does it apply to?

The guidance applies to life insurers who have closed books.

However, the regulator’s announcement says that ‘product providers and intermediaries should also consider the guidance to inform their practices and processes in respect of all products, including actively marketed products, in which long-standing customers are invested, as many of the same issues will arise’.

In other words, any financial services product provider or intermediary should take note of the requirements, for open and closed book policies.

The requirements also apply to outsourced service providers. The guidance sets out the FCA’s expectations of product providers for the fair treatment of closed-book customers in outsourced arrangements.

What do firms have to do?

The regulator expects firms to review their business practices within three months of today’s date (9th December) and make changes, where necessary, in light of the guidance.

It’s clear that the FCA expects firms to consider all communications through the lens of its review findings, and take on board its recommendations in order to deliver better consumer outcomes.

You can find out more about best practice in customer communications and financial promotions in our Compliance Guide to Financial Promotions. The Guide is free and you can download a copy here.

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