With the FCA’s Consumer Duty expected to come into effect from April 2023, industry experts debate how firms can best prepare for the new customer protection regulation

WE ASKED: ”How can firms start to prepare for the FCA’s incoming Consumer Duty?”

Nadege Genetay_Sicsic Advisory

Nadege Genetay

Nadege Genetay, associate director, Sicsic Advisory

“The FCA’s new Consumer Duty marks a significant shift in the regulator’s expectations. It will put the burden of proof on brokers to show that they put customers at the heart of their business and deliver good customer outcomes – and company boards will have to attest to this, based on a detailed report.

”Through the Consumer Duty, the FCA is promoting four good customer outcomes. These include products and services, where brokers will have to demonstrate how their products and services are meeting the needs of customers, and fair value, which will require firms to properly interrogate how their remuneration is justified.

“The third good customer outcome is consumer understanding. To fulfil this, brokers will have to do more than tick boxes on information and disclosure requirements. They will have to show how they help customers to understand their advice and the policy information provided - this might also mean challenging insurers to be clearer in their product documentation.

“The last good customer outcome is consumer support. Brokers will have to be much more mindful of how they support customers to use the products they have bought.

”This means ensuring that brokers support their customers proactively, but also challenge insurers that are not delivering in this area.

“It won’t be enough for brokers to rely on processes and risk management.

“Consumer Duty is equally about creating the right culture among staff, so that poor customer outcomes are called out, as well as investing in new capabilities – in particular around how customers understand information and interrogating management information that is suggesting poor outcomes for customers.

“Commercially, the FCA’s new initiative also presents a real opportunity to rethink customer needs and experiences.

”We would encourage firms to use this as a positive culture change opportunity, rather than a regulatory implementation programme.”

Lee Mostari_Davies Group

Lee Mostari

Lee Mostari, director of insight and analytics, Davies Group

“The only way to ensure compliance success is to improve both working practices around customer engagement and the ability to listen to customers’ changing needs - then implement change to adapt to the changing needs.

“To prepare for the FCA’s incoming Consumer Duty, firms should start by identifying how compliant they already are against the new principles by reviewing internal metrics and management information.

”Gathering data from every single customer channel, including calls, emails, webchat and social media, firms will get an insight on how they can deliver a customer experience that complies with the new regulations.

“After analysing data from direct sources, such as feedback from customer surveys, and indirect sources, like analysis of call recordings, email, webchat conversations and social media, senior leaders will be able to compare business performance against compliance standards, understanding where to improve.

“If the standards set out in the Consumer Duty are not met, organisations need an agile change management process to be able to address gaps.”

Simon Candy, senior manager, propositions and business development, Instanda

Simon Candy_Instanda

Simon Candy

“The imminent FCA Consumer Duty will aim to set higher expectations for the standard of care that firms provide consumers. 

“What this actually means will be subject to differing interpretations among insurers. However, a key focus will be customer outcomes and how insurers interact and transact with clients - both at the start of their policy and throughout the policy lifecycle. 

”As part of this - and set out within Principle 12 - firms must enable their clients to access and assess information and act to pursue their financial objectives.  

“As such, customer communication and engagement is likely to become an integral part of achieving the right customer outcomes. 

”By being transparent and communicating regularly, insurers can support customers and their advisors to be better placed to review and amend existing levels of insurance cover in line with changes to personal or business circumstances.

“Additionally, by providing easy access to all product and service information, clients are better placed to make informed choices because they are likely to have a better understanding of what insurance cover they have.”

Sarah Ouarbya_Mazars

Sarah Ouarbya

Sarah Ouarbya, partner, Mazars

”The new rules are due to come in on 30 April 2023, so there is limited time for firms to prepare.

”For some firms, it is likely to require a fundamental shift in culture and behaviour, with the emphasis moving squarely onto firms to demonstrate they are acting to deliver good outcomes for retail clients.

”Firms can start to prepare by making their board aware of the new Consumer Duty, the outcomes the FCA wants to achieve and the timeline. 

”The next step is to define what a good outcome looks like for each product and customer group. This can then be compared with actual customer outcomes to identify any gaps that require remediation.

”For some companies, actions could be as drastic as reviewing the firm’s business model, distribution strategy and products, while other businesses may need to focus on pricing, communications, or customer service.

”Challenges are likely to include access to data to assess and test customer outcomes, the execution of changes to culture and behaviours and difficulties assessing the fair value of products and services from customers’ point of view.”