"We found widespread examples of poor practices across the sector. In many cases firms were simply failing to understand and manage the risks arising from their appointed representatives’ activities."
As a result of the findings, the FCA has taken early intervention actions in relation to five of the principal firms in the sample, including asking two firms to cease sales activities.
The FCA found that almost half of the principal firms could not demonstrate that they had understood the nature, scale and complexity of risks arising from their AR's activities, and found examples of potential mis-selling as a result of AR actions.
The FCA raised concerns that customers are buying products they may not need, products they may not be eligible to claim under or not being provided with enough information to make an informed decision. At the appointed representatives of one principal firm there was "significant evidence of mis-selling leading to actual customer detriment".
The regulator is now preventing the five firms from taking on new ARs and considering the need for customer redress and whether further regulatory action is required.
Jonathan Davidson, director of supervision – retail and authorisations at the FCA, said: “While some principals did have a good understanding of their appointed representatives’ activities and their obligations as principal firms, we found widespread examples of poor practices across the sector. In many cases firms were simply failing to understand and manage the risks arising from their appointed representatives’ activities.
“General insurance is a large and important sector and we are concerned about the potential for customer detriment arising from the lack of oversight of appointed representatives. All principal firms need to consider these findings and look again at their practices.”
