Preparing for the new regulation has been a ‘huge piece of work’, says chief executive

The insurance industry has been working around the clock since the FCA first mentioned its new Consumer Duty regulation in May 2021, with the new rules creating the most significant regulatory requirements to affect the sector in years.

Essentially, the duty creates new requirements for firms within the sector to ensure – and crucially, evidence – positive customer outcomes around four metrics.

This includes products and services, fair value, consumer understanding and consumer support.

Given these requirements, the insurance industry turned its focus to ensuring that insurance products offer fair value and are comprehensively understood by consumers.

The time for preparation has now passed, however, with the new regulation officially coming into force today (31 July 2023).

Graeme Trudgill, chief executive of Biba, told Insurance Times that the regulation had been a “huge piece of work” for its members.

“Some of the things you have to do in demonstrating your customers understand the products are difficult to do,” he said.

“It’s quite a change, so that’s why Biba are there to support [its members] and help them navigate it, but there is certainly some very challenging elements of it.

“However, members will be doing their very best – [Biba supports] the aims of [Consumer Duty, which are] the great outcomes we all want to see for customers.”

Broker thoughts

Brokers will have long-term relationships with their clients in most instances and continue to live or die based on the quality of advisory service they can provide.

As a result, Nick Houghton, chief executive of broker JMG Group, said general insurance brokers in the UK market were already doing what the Consumer Duty regulation required.

“They will look at some of the questions posed by the FCA as to how they think about this and they will say ‘well I just do this every day anyway’,” he said.

“So, customers have access to people – general insurance brokers are not typically selling products without access to advice.”

However, Houghton felt that while the FCA had been clear enough with its demands to help the insurance sector implement the new regulation, he said it can be a challenge due to the Consumer Duty covering multiple markets in the financial services industry.

“General insurance brokers are just a fraction of the businesses covered by this regulation,” he said.

“[The FCA] have been clear enough in helping us think about it, it is just the sheer breadth and intention of this.”


Speaking at Insurance TimesBrokerFest 2023 event in February this year, the FCA’s director of general insurance Matt Brewis called Consumer Duty “the biggest change in 20 years to how we are regulating insurance”.

And given how many markets it covers, Houghton felt the “difficult bit” for a broker was that they could read the guidance and regulation, but “find it difficult to turn it into something tangible for them in certain areas”.

“That’s where the likes of networks that support them on compliance, as well as Biba, can turn something that may in some areas feel slightly intangible into something more tangible so they can get their head around it,” he said.

Houghton also felt that as businesses become accustomed to the new regulation, they would continue to refine what they were measuring and how to assess fair value.

“The FCA, over time, will [also] share more experiences and give more feedback,” he said.

Enough time?

Over the last few months, the FCA has been keen to highlight that the process of implementing Consumer Duty is iterative and should not be considered an exercise that is completed and then forgotten about.

However, last week (27 July 2023) consumer champion Which? said it was concerned that there were insurers “falling short” of the FCA’s requirements around Consumer Duty and urged the regulator to monitor performance and hand out “tough penalties” for those who fell below the required standards.

The regulator has highlighted its intention to become more assertive around the enforcement of its rules – for example, it hired two new enforcement directors in March and said it was “committed to acting faster and more effectively” where enforcement operations were concerned.

And Houghton felt that the FCA had given firms enough direction and information to ensure they could live up to the duty’s standards from today’s deadline.

He said: “At the heart of this is what every broker should be doing anyway, which is doing the right thing by your customer and looking after them.

“In our market, that’s what we do all day every day.”