The Chartered Insurance Institute (CII) has published a good practice guide for insurers in support of the Financial Conduct Authority’s (FCA) flagship regulatory reform on Consumer Duty.
In May and December 2021, the FCA published two more rounds of consultations on the Consumer Duty, then published its final Policy Statement and Guidance in July 2022.
The Consumer Duty establishes a new Consumer Principle that requires financial services firms to act to deliver “good outcomes” for retail customers, laying out rules on the FCA’s expectations and helping firms interpret the four outcomes the regulator expects from them. These outcomes relate to products and services, price and value, consumer understanding and consumer support.
Firms are given until April 2023 to implement the new rules.
The CII’s good practice guide tackles the FCA’s 68-page policy statement across eight pages. It includes a timeline of requirements on insurers as established by the FCA, as well as case studies published by the regulator to highlight both good and poor practice.
For Dr. Matthew Connell, director of policy and public affairs at the CII, the good practice guide shows what benefits Consumer Duty can bring to firms who explore customer needs from various perspectives.
“One thing that makes insurers nervous about outcomes-based regulation is the thought that it could be interpreted differently over time. What is normal and acceptable now might look very different in 10 or 15 years’ time,” Connell said. “As a result, a lot of the debate around the Consumer Duty has focussed on who is liable if outcomes are not met.”
“As people who understand financial services better than anyone else, we should be aware of situations where people frequently misunderstand products or underestimate risks, and work hard to help them avoid harm, through better communications, better products or more response service,” Connell added. “Firms’ senior managers should be curious about the outcomes that consumers are experiencing, and be able to show that they have thought about any problems and are genuinely looking for solutions.”
The full guide can be read here.
