The multi-firm review from the regulator ‘should be of real concern to the industry’

Some firms are further behind in their planning for the implementation of the FCA’s Consumer Duty regulation and may struggle to apply the rules effectively once they come into force.

This is according to a statement released by the regulator yesterday (25 January 2023), which added that many firms have embraced the shift to delivering good customer outcomes and have established “extensive programmes of work to comply with [Consumer Duty] properly”.

The FCA’s Consumer Duty regulation sets out a slew of updated regulations for insurance firms that must be implemented by a deadline of 31 July 2023 – it includes requirements to end “rip-off” charges and fees and provide helpful and accessible customer support, among other outcomes based on a new standard of fairness.

In its update on how firms were progressing in their implementation of these new rules before the deadline, the FCA explained that it wanted firms to effectively prioritise areas that would have the biggest impact on outcomes for consumers.

Alongside this, it added that firms should ensure they were making changes so that consumers received communications they could understand and that offered fair value.

Sheldon Mills, the regulator’s executive director of consumers and competition, said: “The Consumer Duty will bring about a step change in the way financial services firms treat their customers and we welcome the work firms are doing to implement it.

“Given the scale of the reform, we recognise that some firms need to make significant changes. For firms which are further behind in making the necessary changes, there is time to put that right and for them to show they are acting in the spirit of the new Duty.”

Well covered

Nadege Genetay, partner and consumer duty lead at regulatory compliance firm Sicsic Advisory, said: “[The] review reconfirms the high expectations about the level of focus, engagement and resourcing the FCA has for firms’ Consumer Duty implementation – with six months to go, it is a warning against complacency.

“Firms should review the good and bad practices the FCA found and ensure that these are well covered in their plans.”

Genetay added that the FCA’s findings were the result of a review that covered 60 of the largest financial services firms. The regulator now plans to send a survey to 600 other firms to assess the readiness of the wider market.

Real concern

Matt Scott, co-founder of Insurance DataLab, explained: “[The] multi-firm review from the FCA on the progress made in implementing Consumer Duty should be of real concern to the industry.

“The regulator has highlighted a number of areas where insurers are falling behind their expectations and it has raised some very real concerns that insurers may not be ready in time.”

Additionally, Scott pointed out that the FCA had specified firms were not properly considering their data strategies, explaining that insurers must “think deeper about the type and granularity of data they are monitoring, with inference that greater investment was needed from the industry on this matter”.