Three insurance products could be under FCA spotlight as Consumer Duty warning issued

Three insurance products could be under the spotlight in 2024 following the FCA implementing its Consumer Duty regulation.

That was according to Fairer Finance, which said in a statement yesterday (29 January 2024) that motor excess protection, personal accident cover and home emergency cover could be called out by the regulator this year.

The firm made the prediction after the FCA said guaranteed asset protection (Gap) products may be failing to provide fair value.

As a result, in September last year, the regulator gave firms producing this type of add-on insurance a three-month ultimatum – take immediate action, or it will intervene.

”Already over the last couple of months, we’ve seen wake-up calls for savings firms, investment platforms and Gap insurance providers,” James Daley, managing director of consumer group and ratings provider at Fairer Finance,” said.

“And I think there will be much more to come in 2024.”

Consumer Duty

The Consumer Duty regulation was introduced on 31 July 2023 and requires insurance firms to review their products and services against a new standard of fairness, with companies working hard to measure, analyse and benchmark their performance across a number of different metrics.

These include products and services, fair value, consumer understanding and consumer support.

“There’s also been a lot of work going into simplifying communications – as well as thinking about how best to get the message through to customers at key moments in the customer’s journey,” Daley said.

”We’ve starting to see more websites engage in a radical transparency – admitting the shortcomings of their products as prominently as the benefits.

”And we know that many firms are still hard at work rewriting complex terms and conditions and policy wordings so that their customers can understand them.”

However, Daley claimed that ”not all firms are doing anything like as much – gambling that Consumer Duty is a flash in the pan that won’t amount to much”.

”This is a risky strategy as the FCA has already shown that it intends to deep-dive into how firms are doing on a sector-by-sector basis – following up with Dear CEO letters where it finds shortcomings,” he added.

”It will be a brave chief executive who shrugs their shoulders and ignores these prompts.”