The principle for financial firms to deliver good outcomes for customers sounds pretty innocuous, but is proving fair value as simple as what it seems?

By David Blackman

The end of next month will see the FCA’s new Consumer Duty regulation come into force for insurers and brokers.

David Blackman

David Blackman

This means that while thoughts will be turning to summer holidays, many firms are sprinting to meet the July 31 deadline for the new set of rules, which will require that they act in good faith, avoid causing unforeseeable harm and support customers in pursuing their financial objectives.

The new regulation is particularly far reaching because it includes not just personal lines customers but commercial ones too, including the small and medium sized enterprises (SMEs) that are the lifeblood for so many brokers.

And the duty’s establishment of the principle for financial firms to deliver good outcomes for customers sounds pretty innocuous.

Compliance consultant Branko Bjelobaba argued that the new duty is “pretty simple”, essentially codifying the long-standing regulatory principle of treating customers fairly and can be boiled down to a single powerpoint slide.

However, Catherine Carey, head of consumer strategy at consultancy Consumer Intelligence, said many brokers were still scratching their heads about how to prove they are delivering on the duty’s outcomes surrounding consumer understanding and support, particularly on how to measure the former.

Fair value

According to a survey by insurer Ecclesiastical in January, when the implementation clock was already ticking fast, some 53% of the 250 brokers surveyed admitted they did not understand how the FCA’s Consumer Duty regulations would affect their business.

Carey explained that proving fair value may not be as simple as it looks on paper, pointing to the issue of excesses.

For example, some cash-strapped motor customers may choose a policy with a cheaper premium, but a higher level of excesses.

Coming down with a ton of bricks on companies, which offer such policies, may not ultimately be in the interests of these more vulnerable customers if they end up being priced out of the market altogether.

Both Bjelobaba and Carey felt that the introduction of the new duty should not be the regulatory straw that breaks the camel’s back for SME brokers, enticing them into the arms of consolidators that can take the compliance burden off them.


Despite caveats, Carey felt that the Consumer Duty will be a “burden”, but a “necessary” one.

Nevertheless, Bjelobaba felt it would be a good exercise, probably six months on from implementation, to assess how see how the new duty was working in practice.

However, Carey issued one plea – that the introduction of the Consumer Duty should be the FCA’s last big regulatory intervention for a while.

Following last year’s shake up of motor insurance pricing, brokers are suffering from a high degree of regulatory “fatigue”, which has distracted from core business activities, she said.

This call will probably command more of less unanimous support from brokers as they switch off their laptops, hopefully with clean consciences that they have done everything possible to comply with the new duty.