The FCA has uncovered widespread failings in how general insurance firms manage their appointed representatives.
As a result the regulator has intervened with five firms.
Two have been told to stop selling immediately and two Section 166 reports have been commmissioned.
All five firms have been prevented from taking on new ARs, and the FCA is considering whether customer redress should be paid.
The review covered 15 principal firms.
The regulator has also issued a ‘Dear CEO’ letter to chief executive of principals firms in the sector reminding them of its expectations.
In a thematic review into the sector published today, the FCA says over half of the principal firms the review covered “did not fully understand the risks arising from their ARs’ activities”.
The “serious and widespread” issues present a “material risk of consumer detriment”, the FCA says.
FCA director of supervision for retail and authorisations Jonathan Davidson says: “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.”