Over several years, the Financial Conduct Authority (FCA) has been accused of being “weak and toothless”.
We have seen close at hand the FCA in action with their changes in the motor finance sector, including the banning of discretionary commission models and making commission disclosure more prominent.
The FCA’s introduction of the Consumer Duty on 31 July 2023 was a major change in the regulatory landscape and made financial services set higher service standards for their customers.
The FCA has been very clear in its communications, and the following statement is an example of this: “We’re closely monitoring how firms are putting our new rules in place and will take action against those that aren’t following them.”
We can confirm the FCA has definitely followed through with this statement as evidenced by their recent “Dear CEO letter”. The purpose of these letters is to raise awareness and highlight areas of concern regarding regulatory compliance and industry practices.
If a company receives one of these letters, it is not something that can be ignored.
Last month, the FCA issued a letter to businesses regarding Insurance Market Priorities 2023-2025. In this seven-page letter, there is a specific product relevant to Lawgistics membership, namely the Guaranteed Asset Protection (GAP).
The letter stated: “We have also seen what appears to be high commission levels where it was not clear how these have been assessed as being consistent with fair value. For example, we have seen higher levels of commission for products with a standard non-advised sale, where it was not clear how the commission levels had been assessed to support the delivery of fair value.”
The FCA said its data showed there had been cases where only 6% of the amount customers paid in premiums were paid out in claims with some firms paying out up to 70% of the value of insurance premiums in commission to parties in the distribution chain, such as dealerships.
As a result, firms offering this type of insurance have been given a three-month ultimatum by the regulator to take immediate action or risk an intervention.

We cover roles within all departments and sectors of the Automotive industry, and are here to listen to your specific needs and find the most suitable candidates to fit your business.
Matt Brewis, FCA Director of Insurance, has said: “Customers should be reassured that we’re in their corner and are taking action where we see poor value being provided.”
He added that should GAP insurers be unable to prove they’re providing fair value to their customers, they should expect further action from the regulator.
Moving forward, we suspect there will be fewer accusations of the FCA being “weak and toothless”.
