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Whilst 2019 saw Brexit dominate the political and regulatory agenda, last year also saw two significant regulatory developments. The first being the FCA’s focus and consultation on vulnerable customer needs. Their FG 19/05: General Insurance Distribution Chain and Finalised Guidance for Insurance Product Manufacturers and Distributers set out the FCA’s expectations of insurance product manufacturers and distributors. This applies to pure protection products and all distributors including mortgage brokers.
The second development was the extension on December 9th of the Senior Managers and Certification Regime (SMCR) to directly authorised intermediary firms, which put far greater focus on personal accountability.
Acting in our customers best interests
All of this regulatory change requires us to act in our customers’ best interests, meaning work is required in 2020 to fully embed them, particularly the SMCR.
The focus on improving both access to, and careers in, insurance in 2020 is set to increase significantly in the twelve months ahead with the drivers being:
As an industry and profession we are well positioned to respond to the need for improved access to individual and workplace protection insurance. 2019 saw an increasing number of wealth, mortgage, and employee benefit advisers now working in collaboration with protection specialists. In the year ahead this collaboration in consumer best interests will be further supported by the introduction of a voluntary industry signposting to individual, business and group protection specialists’ agreement and service at the end of January.
April will see the entitlement to receive a statement of written particulars (on basic employment terms and conditions) to include workers as well as employees and make it a day one employment right.
Currently employers have up to two months to issue the statement to any employee working for them for more than a month. Whilst this regulation is to be welcomed, it would benefit all workers and employees to receive this information and know precisely what level of workplace income protection and/or replacement support is available to them and their families. For more information, see part 3 of Employment Rights (Miscellaneous Amendments) Regulations 2019.
Inheritance Tax Simplification & IR35 Changes
We look forward to the Chancellor’s thoughts on inheritance tax simplification consultation and IR35 changes for private sector contractors. Collectively and individually, these issues will provide the industry with the opportunity in 2020 to demonstrate the role that we can play in improving consumer financial resilience to life events. Especially income shocks following life changing and/or limiting medical diagnosis.
New Financial Capability Strategy
Early 2020 will welcome the Single Financial Guidance Body’s new UK 10 year Financial Capability Strategy. It’s important that both as an industry and profession, we work with the new body to better engage consumers and raise awareness of the benefits of improving personal and household financial resilience - especially to income shocks related to health events. It’s essential that the new body stands in customers’ shoes and reflects on the extensive financial changes that have impacted the UK. These include the reduction in household savings to historic lows, the shift from defined benefit to defined contribution pensions, as well as the raft of reforms to working-age welfare provision.
We enter 2020 in a position of relative strength, with the most recent data from IRESS, Equifax Touchstone and other sources suggesting that notwithstanding GDPR and regulatory changes, the industry has experienced growth in demand for advice and in sales for individual protection over the course of 2019. Whilst this is great news, let’s not rest on our laurels, as the next 12 months will bring continued economic uncertainty plus continued low wage growth and frozen working age welfare benefits. This, plus a combination of increased living and transport costs will mean household disposable incomes will continue to be squeezed and constrained.
This renewed pressure on household budgets requires us to work even harder in demonstrating the value and benefits of appropriate financial protection advice, products and services.
Enhanced adviser support in 2020
We’re committed to supporting you and your clients throughout the New Year and decade ahead. To be one of the first to hear about our activities, sign up for our Scottish Widows protection email updates.
Take a look at our interactive calendar which highlights notable dates and events that can help you in your client conversations.