FCA review finds 'significant shortcomings' among insurance agents

The watchdog said its main concern was the risk to customers from the activities of appointed representatives that are not subject to appropriate control and oversight from their principal.

“Some of the firms did not appear to have understood the full extent of their obligations for ensuring their appointed representatives complied with regulatory requirements. Over half of the 15 principal firms in its sample could not consistently demonstrate that they had effective risk management and control frameworks to identify and manage the risks arising from the activities of their appointed representatives.”

As a result of its review, the FCA has asked two firms to cease sales activity and agreed the imposition of requirements on all five firms’ regulatory permissions to stop them taking on new appointed representatives.

Jonathan Davidson, director of supervision for retail and authorisation at the FCA, said: “While some principals did have a good understanding of their appointed representatives’ activities and their obligations as principal firms, we found widespread examples of poor practices across the sector. In many cases firms were simply failing to understand and manage the risks arising from their appointed representatives’ activities.

“General insurance is a large and important sector and we are concerned about the potential for customer detriment arising from the lack of oversight of appointed representatives. All principal firms need to consider these findings and look again at their practices.”