Managing conflicts of interest in insurance

What Changed

• - The FCA explicitly highlights vertically integrated insurance business models (combining underwriting, distribution, premium finance and related services within one group) as a source of heightened conflicts of interest risk, requiring specific gov
• Ownership and financing relationships, including private and non-transparent arrangements within groups or between firms, are now clearly framed as potential conflicts drivers that must be assessed for impact on consumer journeys and commercial incen
• The FCA reiterates that having conflicts of interest is not inherently unacceptable, but firms must actively identify, manage and evidence those conflicts through effective governance, senior management accountability and operational controls that wo
• The FCA states that disclosure on its own is not sufficient; firms remain obligated to properly manage conflicts, and cannot rely solely on informing customers to discharge their duties.
• Firms are expected to review how they design products and panels, structure remuneration, and communicate with customers to ensure that commercial relationships and incentives do not distort customer decisions or outcomes.
• Each entity in the insurance value chain must assess and be able to evidence the value it adds in each link, with particular scrutiny where multiple links are controlled by the same group or related parties.

Suggested Considerations

• Conduct a board-level review of the firm’s business model, focusing on vertical integration, ownership and financing relationships to identify where commercial incentives may misalign with customer interests and create conflicts of interest.
• Map the full insurance value chain (underwriting, distribution, premium finance, ancillary services) within the group or related parties, and document actual and potential conflicts of interest at each link and interaction point.
• Review and, where necessary, update the firm’s conflicts-of-interest policy and SYSC 10 framework to explicitly cover vertically integrated structures, premium finance arrangements, delegated authorities and any intra-group referrals.
• Establish or strengthen governance arrangements to ensure clear senior management accountability for conflicts-of-interest management, including allocation of responsibilities in Statements of Responsibilities and the Management Responsibilities Map.
• Assess product design, panel construction and distribution strategies to ensure they are not unduly influenced by internal group relationships or remuneration structures that could lead to poor customer outcomes or unfair value.
• Review all remuneration, commission, overrides and intra-group transfer pricing arrangements to identify incentives that may drive sales or product steering contrary to the customer’s best interests, and redesign those arrangements where necessary.

Who is Affected