The International Underwriting Association has welcomed proposed changes to the scope of the Financial Conduct Authority’s Consumer Duty rules for insurers, but says further reforms are needed for its members to benefit fully.

The IUA has long argued that the FCA’s rules should not apply to non-UK business and the proposed move to limit the international scope of the Consumer Duty is therefore a positive development. The change would also allow IUA members to apply local regulation where their products are distributed, rather than having to accommodate both detailed FCA rules and local requirements.

The IUA also welcomed proposals in the FCA’s Consultation Paper 26/23 to clarify proportionality measures under the Consumer Duty. However, the extent to which its members would benefit is unclear because there has not been a similar change to insurance-specific product governance rules.

The main benefit to insurers would have been to allow them to rely upon the work of others in the distribution chain, it said, such as managing general agents and brokers, who are often best placed to carry out fair value assessments.

Chris Jones, chief executive of the IUA, said: “The consultation proposals are overall a positive step forward. A move to restrict the international scope of the rules is welcome. If it is supported by a proportionate, and practical approach to implementation, it will boost UK insurers' competitiveness in our most important markets.

“We would, however, very much like to explore further rationalisation of insurance specific rules on product governance. This would reduce duplication of effort by different parties in the insurance distribution chain by allocating accountability according to the activities each firm performs in line with Consumer Duty.”

In responding to the FCA’s consultation exercise, the IUA also argued against a proposal to remove remuneration disclosure obligations.

“Requiring all parties to disclose the payment being received is the best way of ensuring transparency to the end customer," Jones noted. "Reducing transparency could disadvantage customers and encourage undisclosed commission or fee arrangements.”

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