With over 20 years’ experience and responsibility for supervising 5,000 firms, I know that when an issue arises, the first question is often: 'What action will you take?'
That’s a fair question – enforcement is one of the most visible ways we act. It often grabs headlines with big fines and publicity.
But our role as supervisors is to exercise judgement - selecting the right tool to achieve the best and fastest outcomes for consumers and markets.
While enforcement is a vital part of the kit, it’s not the first tool we reach for. By its nature, it can be time and resource-intensive. So we pick which cases to refer to enforcement carefully.
Our approach to supervising firms
Across the FCA, we regulate around 42,000 firms and run a continuous programme of proactive and reactive supervision. We have dedicated supervision teams for our largest firms – so we understand how their specific risks are being managed. But it wouldn’t be proportionate to take this approach with all the firms we regulate.
We are able to assess risks across each market and address concerns. We look at sectors, issues and themes, and prioritise our work. We also use data, intelligence and information from stakeholders to identify risks and keep the market informed.
If we identify an issue in a specific firm, we will speak to them to understand what actions are needed to fix it. Sometimes, problems are straightforward to resolve. Where they’re not, we have a range of tools we can use to deliver results quickly and effectively.
Our toolkit
Our recent work on stolen or written-off vehicle claims shows the scale of what we can do to help – leading to 270,000 motorists being due a total of £200m in compensation, after some insurers had short-changed customers.
We published a press release warning firms and issued good and poor practice examples to raise standards across the whole market. We use these, and other tools like multi-firm reviews, to share the lessons of our work with the wider sector, so firms can consider what improvements they need to make.
Where we have specific concerns, we can ask a firm’s senior managers to sign an attestation or an undertaking. This is a formal commitment that they have taken, or will take, steps to fix problems and consider whether redress is due. We hold that senior manager accountable if they break this. In the example above, a significant proportion of the total compensation being paid resulted from these kinds of attestations. In insurance, we’ve done this more than 75 times since 2022.
And where a firm needs a closer look, we can use a 'skilled persons review' (or more formally a s.166). In practice, this means we get an independent expert to review the firm’s systems, controls and practices and recommend improvements. They can also see where consumers may be due compensation.
We used this option with a small number of firms in the work on stolen and written-off vehicles. Skilled persons reviews are expensive, so we don’t use them lightly. We’ve used this more than 20 times in insurance since 2022. But they can be a very powerful tool for unpicking problems and fixing them.
Where needed, we can also take immediate action to restrict the firm’s ability to operate. For example, we recently asked a firm to sign a voluntary requirement removing their ability to sell new insurance contracts – quickly preventing further harm.
The impact of the Consumer Duty
And the Consumer Duty also provides us with set of principles we can use to fix problems and get compensation to consumers when they’re owed it.
For example, our supervision teams acted when a firm changed home insurance policies at renewal without telling customers clearly. We have secured £350,000 so far in redress for 2,500 customers and improved future communications.
We stepped in with an insurer over problems with consumer understanding and support on its home emergency cover. It improved its claims monitoring, which led to better outcomes for vulnerable customers, and reduced complaints by 61% over 2 years.
We’ve also taken smaller actions – like feeding back to a firm when the use of intermediaries created barriers to people making emergency medical claims. This led to improvements in how they supported consumers.
Weighing up the best approach
If a case is especially serious, we can – and do - refer firms to enforcement for investigation. But keeping our portfolio of investigations focused allows us to make the biggest deterrent impact through enforcement, while often supervision will be the quickest and most effective route to get money back to consumers and stop harm.
While many enforcement cases lead to a public outcome, we’re usually much more restricted in what we can say about the impact of our supervisory work. The law means that we must keep information we receive from firms confidential. That makes it harder to talk about, and even more difficult to name individual firms – although we share lessons and good and poor practice across a sector where we can.
Even when our work isn’t visible, we’re still working to improve the products and services offered to consumers – so that firms live up to the promise of Consumer Duty. This all supports our goal of improving trust in financial services and helping consumers navigate their financial lives.