Are insurers ready for the FCA’s Consumer Duty?

In the latest episode of the Insurance Post Podcast, titled Are insurers ready for the FCA’s Consumer Duty?, David Sparkes, head of compliance of the British Insurance Brokers’ Association, Sarah Ouarbya, partner at Mazars, and Mathew Rutter, DAC Beachcroft’s insurance advisory partner, explore whether the industry is prepared for the new rules coming into force.

The Consumer Duty requires insurers to issue communications policyholders can understand, products and services that meet their needs and offer fair value, and provide customers with the support they need, when they need it.

Firms have until 31 July to implement the new rules for all new and existing products and services that are currently on sale.

Sparkes said some firms are far more advanced with fair value assessments than others.

Fair value assessments take account of the price paid by the end customer, the distribution channel through which the product is sold and a review of the product performance and service.

Sparkes said one of the challenges the industry had with the Consumer Duty was with the lack of prescription in the rules.

He said: “Each insurer has made up their own mind about what they need in terms of fair value for products and that has created a whole cottage industry around this.”

Rutter agreed that it is a mixed bag when it comes to how prepared the industry is for the Consumer Duty.

He said usually size was an indicator of how well a firm is prepared but not infallibly.

Rutter said: “The FCA has said if the firms have done what they said they should have done in terms of vulnerable customers, for example, then they have probably done what they needed to do for the Consumer Duty.

“I suspect there are a number of insurers who perhaps probably haven’t done everything that they could have done and even if you think you have it is one of these ongoing processes where you can always look to improve, finesse and learn from experience.

“I don’t think any insurer should be resting on their laurels and think ‘We’ve done what we needed to do.’”

Ouarbya agreed that work to embed the Consumer Duty into business processes and products and pointed out this needs to be led “from the top” on an ongoing basis.

She said: “The focus is really on the live products (deadline) at the momentm but they need to continually review what they do.”

The trio also explore what the options are for insurers struggling to meet the Consumer Duty implementation deadline plus the regulatory ramifications of failing to meet the FCA’s requirements and the ongoing work that is required to satisfy the watchdog.

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