Happy Birthday, Consumer Duty! The Duty is one year old today.
What has the first year of Consumer Duty brought for the insurance and long-term savings industry – and, of course, most importantly, for consumers?
First of all, it's important to remember that the Consumer Duty builds on existing regulation and on the hard work of our members over many years to deliver high quality, good value products to customers. But, as with anything worth doing, there are always improvements that can be made and more that can be done. The Consumer Duty has helped firms to focus on the hard questions about where they could go further.
There have been many examples of good practice that the FCA has itself praised insurance firms for. It has highlighted instances where the more detailed analysis carried out under the Consumer Duty have resulted in improvements for customers in vulnerable circumstances, and products being adapted to become better value for consumers.
Further examples include one firm re-engineering its processes, taking advantage of automation to reduce the time taken to provide tailored retirement options by 78%. Another has put in place systems to continually review and test its retail insurance customer communications and has partnered with a third party to deliver dedicated support for customers in vulnerable circumstances for its health insurance products.
At the Association of British Insurers (ABI), we have also worked with external partners to promote best practice across the sector. For example, our work with Plain Numbers, an organisation committed to helping people who struggle with numeracy, has helped promote financial inclusion across our membership by producing guidance on clear communication. Several of our members have since taken forward their own partnerships with Plain Numbers, showing our sector’s willingness to engage on these issues.
As a piece of ‘outcomes based’ regulation, the Duty is adaptable to different consumer needs and different firms’ business models. This is a real strength of the approach, but as with any major change, it creates challenges too.
We are pleased to see the FCA’s recognition of the importance of an effective regulatory environment to support the UK’s position as a leading financial centre. This is reflected in the one-year report on the implementation of the secondary objective on international competitiveness and growth, alongside a commitment to go further. Sustainable growth stands to bring substantial benefits to consumers, but this will only be achieved through close collaboration between regulators and industry. That’s why we welcome the FCA asking industry whether and how its rulebook can be simplified to maximise the effectiveness of the Consumer Duty.
Understanding what is required in some areas is another challenge we’ve seen, especially for firms who don’t have ‘fixed supervisors’. We’ve been encouraged by the way that, in this first year, the FCA has provided examples of good practice from across financial service. This helps firms, including the majority under ‘flexible supervision’, learn and assure themselves they are meeting the regulator’s expectations. As expectations evolve, we’d love to see more of this kind of guidance.
As well as good practice, it has been helpful to see examples of where the FCA wants firms to improve, including how to use ‘value assessments’ to drive practical changes. The ABI is working with our members on these areas, for example via our regular Consumer Duty Forum, made up of experts from around the industry, and via bespoke learning and development events such as two recent workshops on Price and Value.
As an industry, we’re supportive of proportionate and effective regulation designed to protect consumers and have taken steps to maximise Consumer Duty benefits for customers. At the same time, despite all the good work, our members tell us that the resources required for implementation are in some cases significantly greater than the FCA had suggested in its original cost-benefit analysis (CBA).
So, we stand ready to work with the FCA and the new CBA panel set up under Financial Services and Markets Act (FSMA) to look at how we can improve the assessment of future regulations so that we all understand the impacts on businesses – and ultimately on consumers and the competitiveness of the UK – when new regulations are introduced.
We’re also conscious of the fact that there are a few areas where the Consumer Duty interacts with other regulations in ways that still need to be clarified for our members to deliver all their regulatory requirements with confidence. Pensions communications being one notable example. We’re grateful for the engagement we have received so far from the FCA and other government and regulatory partners, including DWP, TPR and the ICO to work this issue through.
Similarly, recent reports that some advisers are withdrawing from the market because of concerns around the Consumer Duty are worrying and emphasise the importance of delivering on the Advice Guidance Boundary Review. The Review should aim to provide certainty to all – advisers, platforms and insurance firms alike - about how we can collectively provide the good outcomes that consumers need.
Because at the end of the day, that’s what we believe the Consumer Duty is about. It’s a backbone of regulation to provide assurance for the customers who need us, whether that’s a holiday-maker struck down by a medical emergency abroad, a small business owner dealing with a potentially catastrophic flood in their premises, or a soon-to-be-pensioner wondering how they should use their pension pot to secure their future. Customers deserve good outcomes from us, and this is what we, as an industry, are committed to delivering.
- Review and Revise Job Advertisements Ensure that job descriptions focus on essential skills and tasks, using clear and straightforward language.
- Adapt Interview Processes Consider alternative interview methods, such as practical tasks or providing questions in advance, to better accommodate autistic candidates.
- Provide Autism Awareness Training Educate all staff members on autism and how to support autistic colleagues, fostering a more inclusive workplace culture.
- Implement Accommodations Offer flexible work hours, create quiet workspaces, and provide clear instructions and structured routines to support autistic employees.
- Develop Support Plans Have plans in place to support employees during challenging situations, such as meltdowns, and provide access to mental health resources.