FCA review of closed book customers

Date posted: 03/05/2016

The FCA has published a review where it has looked at firms’ performance in some areas like fair treatment of closed book customers, timely communications - By Eoin Lyons

The FCA has published a review where it has looked at firms’ performance in the following areas:

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

 The main concerns found were:

  •  The impact of exit and paid up charges on policies was in some cases significant and could cause a barrier to transferring away
  • Some customer communications did not tell the client of when the above charges were applied i.e. when the policy was exited or made paid up.

This sets an interesting challenge. How does a firm meet its contractual and regulatory obligations to closed book customers in a cost effective way? What is the best solution to deliver excellent service and the transparency that will protect the firm’s brand?

A thought is to digitally enable the proposition to give customers instant access to information and the ability to self-serve where and how they want. This regulatory challenge may well be an opportunity to create new value for a closed book customer and the firm alike.

The FCA will now take these issues up with the industry with a view to reaching a voluntary solution. We will closely monitor the outcome of the next stage of this review and continue to lead this conversation with our partners and the market.


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