No Match Found
By Padraic Walsh
The 3 February Dear CEO letter sets clear challenges to general insurance and pure protection (GI & PP) firms as the Consumer Duty deadlines loom. Alongside a reminder of existing expectations and setting out expectations for the remaining outcomes, there is a very clear warning. The FCA will act “much faster and more assertively” where firms do not meet the requirements of the Duty.
This can be broadly split into three focus areas:
The FCA is concerned about the degree and effectiveness of PROD 4 implementation. No products have been removed due to fair value issues and elsewhere claims ratios suggest concerns for some product types.
Firms should consider whether their products are genuinely offering fair value, and look beyond metrics such as loss ratios to evidence fair value.
Including a qualitative assessment will be more likely to lead to changes to product offerings, and in some cases, firms may consider it is appropriate to withdraw certain products from the market.
Firms will no longer be able to focus effort, resources and quality considerations in the parts of the lifecycle that give the greatest commercial benefit i.e. sales and marketing. Instead, they will need to consider customer journeys at all points of customer contact and ensure that customer outcome expectations are met. Particular focus is on claims handling, which the regulator sees as a key element of the product lifecycle. Implementing these outcomes could involve the development of new processes to manage and test communications and the way customers interact with firms.
A challenge which should not be overlooked by firms is the additional complexity where there are other parties in the distribution chain and where services such as claims are outsourced. Defining responsibilities and gathering and sharing information can present significant challenges for firms in delivering and evidencing compliance.
The regulator has also overlaid its narrative on the Consumer Duty by making a clear link with the following areas:
cost of living
Firms should ensure that these areas are considered and factored into their implementation plans. For firms who are not yet fully compliant with the FCA’s vulnerable customer guidance, there is a clear warning they will not be compliant with Consumer Duty; the FCA clearly believes this sector has more work to do in this area.
With the clock ticking and deadlines fast approaching, firms and senior management should consider how they are likely to look in the new Consumer Duty world. The regulator has promised to bite faster and harder where it finds that the customer outcomes are not being met.
Partner - Regulation, PwC United Kingdom
Tel: +44 (0)7801 565492
Director, PwC United Kingdom
Tel: +44 (0)7483 427928