The Financial Conduct Authority (FCA) have issued an information request to the majority of firms with with-profits business to help us carry out a multi-firm review of the sector.
One of the FCA’s priorities is firms’ treatment of existing customers. This review into the fair treatment of with-profits customers, included in their 2017/2018 Business Plan, is a key part of this programme of work.
With-profits policies are an investment type offered by some life insurance companies. Money from each investor is pooled with that of other investors in a company’s with-profits fund. A with-profits fund usually invests in a range of different assets including shares, fixed interest securities, cash and property.
A particular feature of with-profits is ‘smoothing’. Smoothing aims to even out some of the short-term ups and downs that may be experienced when investing directly in the stock market or other investments. Guarantees are also an important feature of many types of with-profits investment.
The last full review that focused on with-profits business was in 2010. The forthcoming review into the fair treatment of with-profits customers will allow us to understand further the range of practices that are now being adopted by firms.
The information request is designed to help us identify the most appropriate areas to focus on in the review. The review itself is scheduled to commence in Q4 2017 or Q1 2018.
The FCA do not have pre-determined views about whether any particular practices are unfair or are leading to unfair outcomes and have not drawn any conclusions about whether with-profits customers are being unfairly treated.