Consumer Duty Update – Are We Making the Right Shifts?

The overall outcome is that there have been improvements since Spring 2023, most notably in relation to Personal & Commercial Lines (P&C) Insurance Intermediaries:

• Relevance: The number of firms in the second wave who believe the Consumer Duty as being relevant to their firm was lower than the first going down from 95% in wave one, to 88% in wave two.
• Fair Value Assessments: 80% of firms in the survey had completed fair value assessments on their existing products and services, 11% was still in progress and 9% stated it wasn’t applicable.
• Consumer Journey: Only 66% of P&C Insurance Intermediaries had assessed the end-to-end consumer journey with 26% of firms having this in progress and 9% stating it isn’t applicable to them.
• Target Market: 80% of firms had identified the target market for each of their products and services, 13% were in progress, 6% stated it isn’t relevant to them.
• Vulnerability: 71% have assessed the needs of consumers with vulnerable characteristics, 21% have this in progress and 7% say it isn’t relevant for them.
• Supply Chain: Only 55% of firms in our sector have discussed Duty requirements with other firms in their supply chains with 27% of firms having not started this.

The results also show that the main area that firms are finding difficult to implement is around outcomes monitoring (no surprise). 68% of firms in our sector stated that following a review, no communications have been identified for amendment or withdrawal because they did not support the consumer understanding objective and 45% of firms have not made changes to their marketing strategy.

A lot of P&C Insurance Intermediaries have made some changes to their consumer contracts in some form (whether this be minor or major updates), with most changes relating to consumer understanding and price and fair value. 29% have made no changes at all.

What Firms need to consider:

If the results of the survey provide a true reflection on the sector, then 12% of insurance intermediaries do not believe the Consumer Duty applies to them. If you are one of those firms, it is strongly recommended that you revisit the requirements of the Duty and your business activities to determine where the Duty may impact you.

It is promising to see that 80% of firms in our sector have completed fair value assessments, where these are still in progress firms need to push forward in completing these as quickly as possible if they don’t want to see FCA intervention on this matter.

Identifying the target market and then assessing the end to end customer journey for that target market is a key aspect of the Duty so if you are behind the curve on this, you need to get a move on as its very hard to say that your customers are achieving the right outcomes if you haven’t fully assessed and determined your target market and then reviewed their journey throughout the lifecycle of your products and services. This should include customers who have characteristics of vulnerability.

The results of the survey show a clear gap in conversations taking place throughout the supply chain with only 55% of P&C Insurance Intermediaries having completed this. There is clear work to do here, and we need to ensure that we can show our industry can work together in implementing the Duty and we should be identifying any barriers that are preventing us from progressing in this area.

In relation to customer communications and contracts, where firms have not had to make any changes, they should ensure that they have recorded the appropriate rationale for this and should consider an independent review of such communications, if not carried out already.

Being able to evidence outcomes via Management Information has always been a focus of the FCA so it is not a surprise that this is a key area of the Duty and the one in which firms are finding most hard to implement. This is an area that will require a lot of focus and due to this, our partner company Ever Comply is in the process of offering a solution that should help firms to address this gap and to be able to report on outcomes that are relevant to them in a clear and effective way.

So, it’s clear that a lot of progress has been made but there is still plenty to do.

If you require support in any of the areas mentioned in the survey or want to revisit these areas due to some of the results provided, please get in contact and we would be happy to help. If you want to discuss the work we are doing with Ever Comply on Consumer Duty reporting, then please contact us here info@padda-consulting.co.uk

* Research Overview – Autumn 2023 Survey
Ipsos had previously carried out a survey in the Spring of 2023 to help the FCA understand how prepared firms were for the Duty implementation for open products. In Autumn 2023 (around two months after the implementation deadline), they carried out the second of three waves of quantitative research focusing on compliance and action taken in response to the Duty. This survey looked at firms across multiple sectors (634 firms in total)