Insurance firms may not be ready to implement new product governance rules, according to a review published by the Financial Conduct Authority (FCA).

The review found that some firms had made good progress in meeting the FCA’s existing rules and guidance on product governance and value, issued in 2018 and 2019, as well as against temporary guidance on product value, issued in response to COVID-19 last year.

However, too many firms were not fully meeting the FCA standards.

In addition, many firms were likely to be unprepared to meet new enhanced rules on product governance, which come into force on 1 October 2021.

These rules are part of a wider package of remedies introduced by the FCA to tackle the ‘loyalty penalty’ and ensure that firms focus on providing fair value to all their customers.

The review found weaknesses, including insufficient focus on customers, outcomes and product value, including when considering value in the context of COVID-19 and shortcomings in governance and oversight of products.

Sheldon Mills, executive director for supervision, policy and competition at the FCA, said: “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.

“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.

“These firms have significant work to do urgently to be able to comply with the enhanced product governance rules. Firms that fail to do that work risk regulatory action.”