Nearly three quarters of brokers said the ramping up of regulation was overwhelming 

Three in five brokers (60%) have admitted they don’t understand how the FCA’s Consumer Duty regulations will affect their business, according to new research published today (10 January 2023) by specialist insurer Ecclesiastical.

Only 53% of brokers, moreover, are aware of the regulator’s new rules – suggesting that 47% of firms are behind schedule to meet the requirements.

Adrian Saunders, commercial director at Ecclesiastical Insurance, said “this is one of the biggest regulatory changes in recent years” and “will require a significant shift in both culture and behaviour” among firms.

He continued: “All firms should have an implementation plan in place by now, which should include training to ensure all senior management are aware of the significance of the new Consumer Duty and their role and obligations in terms of ensuring compliance with the new standards.

“Brokers should also be engaging with their insurer partners and other firms in the distribution chain. As we approach next summer, we’ll hopefully see more brokers supportive of the new regime.”

These results came from a recent survey of 250 brokers, commissioned by Ecclesiastical Insurance and conducted by FWD between September and October 2022.

Further findings

Alongside uncertainty, the insurer’s survey found that 26% of brokers consider demonstrating they are supporting their customers as the biggest challenging in meeting the FCA’s requirements.

A further 22% of respondents said identifying future customer harms would be their biggest challenge.

Three quarters of brokers (75%) agreed that regulation was vital in achieving better customer outcomes and 73% stated there was too much. Around 67% said complying with regulation put pressure on their business.

Regulation requirements

The Consumer Duty introduces a new principle for financial firms to deliver good outcomes for customers, underpinned by three rules – firms must act in good faith, avoid causing unforeseeable harm and support customers to pursue their financial objectives.

To prove that the new standards would be met, firms were required to agree on implementation plans at board level on 31 October 2022.

By 31 July 2023, insurers and intermediaries will need to implement the Consumer Duty for new or existing products open to sale or renewal. The deadline for closed products or services will follow one year later (31 July 2024).

Ecclesiastical has teamed up with consultancy RWA to provide advice and support to brokers amidst the Consumer Duty clamp down.

RWA’s head of compliance Steve Walton said: “RWA continues to work closely with brokers and have completed a significant number of Consumer Duty gap analyses.

”A common trend amongst brokers is that there appears to be a lack of suitable evidence and good standard of management information to support the demonstration and delivery of good outcomes for customers.”