Every year, many brokers and insurers sign a certificate saying the person who manages their claims processing is fit and proper. On 22 October the regulators proposed to stop asking.
The FCA’s CP26/37 would remove the Certification Regime, which tracks around 139,000 individuals performing about 261,000 functions. The FCA puts the annual cost of SM&CR compliance at £434.5m, says its proposals cut that by £229.0m, around 53%, and attributes the largest single saving, £133.0m a year, to removing certification. The FCA’s guidance lists the processing of insurance claims among the examples of what the significant management certification function covers.
The Bank of England says the joint PRA and FCA package should save firms around £2bn over ten years. Chief actuaries move from pre-approval to notification, and PRA pre-approvals fall by 43%.
Insurance Business notes that the annual exercise falls hardest on smaller insurers, MGAs and brokers with thin compliance teams. The Lloyd’s Market Association welcomed the proposals and wants them in force before the end of 2027.
Here is my problem. Certification was the one moment each year when a firm had to write down why the person running its claims was competent. The Conduct Rules still apply and firms remain responsible for competence, so the duty survives. What disappears is the paper trail that proved it.
It is a little like abolishing the MOT certificate while keeping the law that cars must be roadworthy. Most drivers would carry on servicing. The ones who would not are the reason the certificate existed.
For the market, £133m a year is real money, and much of it sits in firms where one compliance officer does everything. The test is whether those hours move into claims quality or into margin. Comments close on 22 January 2027, with final rules due in the first half of the year.
Sources: FCA CP26/37; Bank of England; Insurance Business.