UK insurers are inadequately prepared in some cases for stronger product governance rules due to take effect at the start of October, the Financial Conduct Authority (FCA) has warned.

“We know some firms are doing the right thing but with the deadline for implementing our enhanced rules less than two months away, it’s worrying that some firms may not be ready,” Executive Director for Supervision, Policy and Competition Sheldon Mills said.

FCA last week published a review of progress firms have made on meeting existing rules and guidance issued since 2018, and in response to COVID-19.

The review found instances of an insufficient focus on customers, outcomes and product value, including in the context of COVID, and shortcomings in governance and oversight.

Issues included excessive commission levels that boosted total prices and undermined value for consumers and the lack of a customer lens during product development processes.

“Where firms are not consistently meeting existing requirements and expectations, it risks harm through poor value products or products being sold to the wrong customers,” Mr Mills said.

“These firms have significant work to do urgently to be able to comply with the enhanced product governance rules.”

FCA has warned it will intervene and use the full range of its regulatory tools, including requiring firms to remove products from sale where necessary, if firms don’t fully meet the rules.

The Association of British Insurers says since data was collected for the FCA review significant work has continued to meet requirements set for October, and new pricing rules due to be introduced by January.

“Inevitably, whilst some firms will be more advanced than others in preparing for the new rules, all our members are fully committed to continuing to work with the regulator to ensure change is delivered on time,” Director, General Insurance Policy James Dalton said.