The introduction of Consumer Duty by the FCA has seen a significant transformation within the Financial Services Industry. This regulatory initiative impacts all financial firms, including insurers, and places a strong emphasis on ensuring “Good Customer Outcomes”. It is an industrial call to action on financial services to continue ensuring positive customer journeys.
Whilst the implementation of the regulation on new and existing products and services has already been met with a dedicated effort by the insurance sector, there are further hurdles on the horizon. A concerted effort needs to be made to meet the July 2024 deadline for closed-book products and services and the most challenging aspect of the regulation remains – the proactive continuation of efforts to ensure fair value for all consumers. As highlighted by the FCA, this is not a once-and-done exercise, but rather a continuous cycle to ensure positive outcomes.
The FCA’s “Dear CEO” letter in Feb 2023 emphasised this as a key priority and already, post implementation of the regulation, insurers are feeling the pressure. A year on, the FCA has reviewed efforts to date; they have acknowledged successes but warned of areas requiring attention. Particular examples pointed to unreasonable delays to claims processing, as well as unreasonable claims settlements. Furthermore, following a recent Guaranteed Asset Protection products assessment, the FCA raised the concern of potentially failing to provide fair value to customers or inadequate levels of cover due to a lack of customer comprehension.
With the FCA committed to continuously monitoring and ensuring appropriate enhancements of capabilities are undertaken, insurers should be mindful not to waver in their efforts for Duty compliance. Continuous enhancement of customer experience will limit FCA intervention and deliver good customer outcomes.
The Consumer Duty defines four outcomes in the context of the insurance industry:
There is a natural tendency to focus on the core manufacturing components (providing tailored products/services with fair pricing) to provide positive outcomes. However, if the entire customer journey is considered (including the customer knowledge gap and support accessibility) a truly consumer-centric approach is formed, aligning fully with the spirit of the Duty. Efforts to further enhance manufacturing capability always continue to be worthwhile, but these should not be at the expense of a heightened focus on improving consumer support. There needs to be a rebalance of focus to concentrate efforts on consumer support. A consumer-centric approach is achieved with an optimal customer journey – ensuring customers experience a great level of service, fully comprehend the coverage provided with needs met, are provided fair price and value, and are compensated appropriately and within reasonable timelines when claims are raised.
Organisations must be able to demonstrate a culture of consumer-centric approach and precedence of customers in their culture, purpose and behaviours.
Here are some areas for consideration:
For both closed and open book products, collecting sufficient and valid data to generate reporting and MI that demonstrate compliance with consumer duty and highlight areas for improvement.
Develop a working understanding of key elements of the Consumer Duty regulation and how they apply directly in the context of your business.
Understand fully your product and service offering and their consumers, and continually work towards best practices as per the Duty.
Internal and external communications should be transparent, timely, and focused on providing fair value.
As the Consumer Duty has become a reality in the financial services landscape, insurers must proactively and continuously improve their offerings and services. For the FCA, under the Consumer Duty, success will be achieved when firms truly understand their customer needs (including vulnerable customers) and demonstrate a proactive culture to continuously improve as well as identify and address issues or gaps to ensure good customer outcomes are met. We at Projective Group have the expertise and industry knowledge to serve as valuable partners in this journey, guiding organizations towards compliance and fostering a culture of positive customer outcomes.
Projective Group prides itself on its track record of supporting clients through large-scale, regulatory directed change. Our clients’ needs are met through maturity assessments and working with internal and external service providers to deliver pragmatic solutions. This ensures outcomes are effective, robust, and sustainable. In the UK, we analyse complex regulations and break them down into tangible outcomes and actions providing value through relieving the burden of the constantly changing regulatory landscape and reporting process.
We have designed and built data models, as the backbone of Operational Resilience; led company-wide programmes to be compliant with regulation such as DORA and GDPR; we continue to manage company-wide AML and KYC services. We provide support to senior stakeholders in shaping organisational change strategy and responding to evolving requirements. Across Insurance and Financial Institutions, we have led complex regulatory response projects through risk assessments, enhancing customer journey, and improving regulatory reporting. If you would like to find out more and discover how Projective Group can empower your business, please contact us here.