Briefing: Consumer Duty - Regulatory headache or brilliant opportunity?

By Matt Scott

As the latest in a long line of regulatory interventions from the FCA, the new Consumer Duty rules will introduce a swathe of fresh requirements for insurers to grapple with.

While the new rules are not fully in force yet, insurers had until the beginning of October to get their implementation plans in place.

This included detailing how they will “monitor and regularly review outcomes” for their customers - a key new requirement of the Consumer Duty rules.

It is hard to argue against the consumer benefits of these regulations, but while they will undoubtedly increase the compliance burden for insurers, they also present a myriad of opportunities that can help insurers to win new business, better retain existing customers and boost profitability.

As long as they get things right.

This is because the insurers that come out on top when it comes to the factors that matter to the FCA through its Consumer Duty lens will be demonstrating that they are offering a best in class customer experience for their policyholders.

This should, in turn, help with retaining customers – particularly due to the fact that the FCA’s general insurance pricing practices regulations have effectively banned price walking, meaning that personal lines customers will find it harder to find cheaper prices elsewhere when their policy comes up for renewal.

And, with word of mouth and customer reviews being such an important point of reference for consumers looking to find a new insurer, being able to demonstrate a market-leading customer experience can also lead to new business wins in a market where introductory offers have been outlawed under the aforementioned pricing rules.

If this argument isn’t enough to convince insurers of the benefits of the new Consumer Duty rules for insurers as well as customers, then data from Insurance DataLab can add even more fuel to the opportunity fire.

Research from the market intelligence firm last August found a direct link between customer experience and profitability, with insurers that deliver a better customer experience also reporting a lower combined operating ratio (COR).

Indeed, every percentage point increase in an insurer’s Insurance DataLab customer experience rating led to just over a 0.8 percentage point improvement in the corresponding COR.

All of this, of course, means that staying informed on how your business is performing on customer experience – as well as the performance of your peers and the wider market – is vitally important for any insurer looking to get ahead in what is a highly competitive marketplace.

Happily, the Consumer Duty regulations have taken this necessary focus on customer experience beyond being a business by business decision into the land of being a compliance requirement to keep on top of consumer outcomes.

Now insurers just have to make it work for them too.