FCA review on rule simplification offers ‘opportunity’ to forge ‘proportionate’ framework – Jon Dye

The FCA’s review investigating streamlining its rulebook provides “an opportunity to improve the way” that the regulatory “framework operates”, according to Jon Dye, chief executive at Hiscox UK.

On 29 July 2024, the FCA launched a market-wide consultation “to identify rules which could be removed or simplified” if they overlapped with its more recent Consumer Duty principles – regulation that came into force from July 2023 focused on customer protection.

At the time, Nikhil Rathi, chief executive at the FCA, said: “We now want to seize the opportunity of the [Consumer] Duty and the move to a clear outcomes-based approach to streamline our rulebook, lowering costs for businesses and supporting the competitiveness and growth of the economy.”

The consultation closed on 31 October 2024.

Speaking to Insurance Times about the review, Dye said: “From my point of view, regulation needs to be proportionate. Clearly, it has an important role to play in our industry.

“It needs to be proportionate. It needs to be as clear as it can be. And if this review is an opportunity to improve the way that the framework operates, then that’s a good thing.”

Although the FCA emphasised that a primary driver of the review was to align prior regulation more closely with Consumer Duty and to remove possible duplication – and, therefore, complexity – Dye does not think there is much repetition between old and new rules.

“Clearly, Consumer Duty does interact with other bits of the of the regulatory landscape, but we haven’t found it difficult to work out how those interactions should work,” he said.

‘Significant change’

Consumer Duty requires firms to measure, analyse and benchmark their performance across a number of metrics designed to bolster service – these include products and services, fair value, consumer understanding and consumer support.

Dye described the rules as “a significant regulatory change” that “has involved a good deal of work” to implement and embed within Hiscox UK.

Although this can only have been an administrative burden, Dye is focused on the positives.

He said: “One of the things I’m really pleased about is we have used [Consumer Duty] to improve a lot of things in the business and make small changes to our offerings that will prove, through the testing that we do, that they’re better than they were before.

“We have done a huge amount of work looking at our customer communications and making sure that they are as clear, understandable, succinct as they can possibly be.

“That is something that we would be doing anyway, but the Consumer Duty requires you to do that in a fairly structured fashion and we’ve got a lot of value out of that.

“So, I would look at [Consumer Duty] and say ‘well that was a big change, but we have improved our business as we have implemented it’.”

Clear intentions

Some industry commentators that Insurance Times has spoken to have been frustrated that the FCA’s fair value ethos and Consumer Duty rules are not more prescriptive, with the regulations’ implementation relying heavily on individual firms’ interpretation.

For example, Catherine Carey – head of marketing at Consumer Intelligence – told Insurance Times in March 2023 that “the guidance was so woolly from the regulator” and “that there wasn’t enough explanation” at the outset.

Dye disagreed with this stance, however.

He said: “From my point of view, what [Consumer Duty is] intended to achieve is clear.

“If you can sit there and satisfy yourself that your products or your services are adding value to your retail customers, then you are doing what the Consumer Duty requires you to do. There’s enough in the words that have come out from the regulator to allow you to do that.”