The FCA is crystal clear in its consumer duty consultation paper about what it wants the insurance profession to achieve.
The regulator wants the profession to innovate to address the unmet needs of consumers – action we consider vital to raising public trust in our profession which is why it is explored by our President’s Forum.
The FCA’s vision for a consumer duty is supported by our own public trust index, which regularly surveys 1,000 consumers of insurance.
Our public trust index has frequently shown failure to address unmet needs will ultimately result in the erosion of trust in the profession.
Trust, once broken, takes years to repair so as a professional body, with a Royal Charter commitment to increasing trust in insurance, we fully support the regulator’s push for cultural change that enables consumers to make informed and timely decisions, receive satisfactory support from providers and take action to address their needs.
Initial feedback to our Shaping the future together consultation shows there is appetite among professionals to further develop the skills and knowledge required to consider all the needs of their customers – including those in vulnerable circumstances.
Ours is a profession that sees the value in better understanding how consumers behave, at every stage of the product/service lifecycle, as without this knowledge we will struggle to improve the financial resilience of everyone in society.
This was clearly demonstrated by the number of businesses that were signatories to our Insuring Women’s Futures “Inclusive Customer pledge”.
The CII is committed to equipping the insurance and personal finance profession with good practice guidance and the learning material they need to be fully aware of what customers experience.
The FCA’s consumer principle will reflect the overall standards of behaviour the FCA expects from firms.
The wording being consulted on is: 'a firm must act in the best interests of retail clients' or 'a firm must act to deliver good outcomes for retail clients'.
While we welcome the motivation behind a consumer duty, I believe managing consumer expectations of what will be achieved by this regulatory requirement is key if the excellent progress of our profession isn’t to be inadvertently oversold and under-delivered to the public.
We will be engaging with the regulator to ensure there is an understanding that a fair outcome and good practice doesn’t always result in the outcome a consumer might perceive as the best for them.
For example, the consumer duty won’t eradicate disappointment when a policy fails to pay what an individual hoped for, but commitment to clearer, inclusive communication should hopefully result in individuals understanding why they received an amount.
The FCA’s consultation paper outlined final consumer duty rules are expected by July 2022, with an implementation period for firms running until April 2023.
Regardless of the final wording of the consumer duty, the ongoing appetite for the CII’s good practice guidance and engagement with the President’s Forum theme of unmet needs shows the profession’s commitment to fair outcomes today.
We welcome the FCA’s intention to work closely with professionals throughout the implementation period to identify where further good and poor practice examples might supplement draft guidance.
Let me reassure you that, as your professional body, we will be engaging with the regulator on the profession’s behalf to share the many examples of good practice we have seen.
