FCA publishes finalised guidance for the fair-treatment of closed-book customers

The Financial Conduct Authority (FCA) has today published its finalised guidance providing firms with detailed information on the actions they should be taking in order to treat their closed-book customers fairly. The FCA wants to ensure that closed-book customers, who have life insurance products that are closed to new business, are treated fairly and do not receive less attention than customers who have recently taken out a new product.

This guidance forms part of a programme of work across the FCA that aims to address the risk of poor practice in the treatment of existing customers, as outlined in our Business Plan.  As stated in our Mission document, some groups of consumers are likely to be vulnerable because of circumstances that we do not want to see firms take advantage of, such as those who are trapped unwillingly in long-term contracts.

The guidance follows the findings of the FCA’s thematic review into the fair treatment of long-standing customers in the life insurance sector (TR16/2) which found a mixture of good and poor practice across the firms involved.

The guidance covers four high-level customer outcomes:

  • the firm’s strategy and governance framework results in the fair treatment of closed-book customers;
  • the firm’s closed-book customers receive clear and timely communications about policy features at regular intervals and at key points in the product lifecycle to enable them to make informed decisions;
  • the firm gives adequate consideration to, and takes proper account of, fund performance and policy values in a way that ensures it treats its closed-book customers fairly and proportionately;
  • the firm’s closed-book customers are able to move from products that are no longer meeting their needs in a fair and reasonable manner.

Megan Butler, Executive Director Supervision – Investment, Wholesale and Specialists Division at the FCA said:

“Our previous work in this area uncovered poor practices at some firms across the sector. We are not introducing new rules, but this guidance will help firms know what we expect of them to ensure their customers are treated fairly going forwards.”

The products covered by the guidance are personal pensions (including SIPPS and Retirement Annuity Contracts), endowments, investment bonds and whole-of-life policies. However, the FCA expects firms to consider the guidance in informing their practices and processes in respect of all products, including actively marketed products, in which long-standing customers are invested.

Firms are expected to review their business practices within three months of today’s date and, if necessary, make changes to them in light of the guidance. 

Notes to editors

  1. Finalised guidance FG16/8: Fair treatment of long-standing customers in the life insurance sector
  2. Thematic review TR16/2: Fair treatment of long-standing customers in the life insurance sector
  3. On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  4. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  5. Find out more information about the FCA.