People in Insurance: Changing the Conversation
Business:Management
What is the FCA’s Consumer Duty and how will it affect you and your business?
How much work will it take to meet the requirements of the duty?
When do these changes need to be implemented, and how should you prepare for them?
In this episode of the Insurance Broker Podcast, we are thrilled to be speaking with Tim Chadwick Group Chief Risk Officer at the PIB Group. In conversation with Boston Tullis’ Sarah Myerscough, he discusses the wide-reaching nature of the new duty, which could necessitate a substantial revision of various aspects of financial services firms’ operations.
Having determined that, broadly speaking, client satisfaction and protection within the industry is inadequate, the FCA’s new regulation demands a new approach to the consumer journey which protects clients at every stage of their interaction with a financial services firm, including after the purchase of a product. As such, it is essential that brokers understand what the new Duty requires of them.
Quote of the Episode
“In a nutshell, what the regulator is really looking for firms to do is to put themselves in the customer’s shoes and to make sure that they're focused on good customer outcomes, and really importantly, that it's part of their firm's culture. So, this isn't some box-ticking exercise. There are very clear expectations around culture and, importantly, around the role of the board in all of this.”
Throughout the episode, Tim asserts that the Consumer Duty is not merely a superficial administrative exercise. Rather, it reflects a concerted effort on behalf of the FCA to transition from a consideration of customer satisfaction within financial services as a matter of box-ticking to a responsibility embedded in the culture and practices of a given firm. A protection of the customer at all levels must therefore be interwoven through the fabric of the organisation. For some businesses this may require a few tweaks, while for others it may necessitate a systematic restructuring of practices.
Key Takeaways
Most brokers always work in the best interests of their clients. While the FCA recognizes this, they also acknowledge that some firms within the wider financial services sector fail to implement sufficient strategies for the protection and wellbeing of their customers. Some products and services are either not fit for purpose, or ill-suited to their ostensible target market. Furthermore, some products arguably fail to deliver fair value to customers.
In 2020, the FCA conducted a Financial Lives survey, which found that only 35% of financial services firms were deemed to be honest and transparent in their dealings with clients. As such, the Consumer Duty aims to usher in higher standards of customer support, to ensure that their needs are always attended to by firms, particularly if they are vulnerable, and that ultimately, positive customer outcomes are secured. While this notion is not entirely unprecedented, the Duty develops on regulations already in place by focusing more on positive outcomes for customers and imposing a clear responsibility upon firms to evidence that they are consistently achieving these outcomes.
The duty is a series of measures which orbit around a central principle, being that firms must demonstrate that they can deliver good outcomes for retail clients (both individual and commercial).
This notion, Tim explains, is underpinned by three cross-cutting rules:
- Firms must act in good faith, addressing the imbalance in knowledge and expertise between themselves and clients
- Firms must identify areas of foreseeable harm and curtail them
- Firms must enable and support customers in pursuing their financial objectives by providing them with appropriate and accurate information and advice
Tim subsequently outlines four outcomes associated with the consumer duty, explaining in detail the FCA’s guidance about how firms should conduct themselves. To hear his advice, listen to the episode today!
The deadline for implementing the Consumer Duty is 31st July 2023. Thus, it is key to act now to implement behaviours which fulfil these new obligations. Your firm’s preparations for this must be tailored to the specific innerworkings of your business. There is no one-size-fits-all approach; you must recognise the principles of the duty and apply them to the customer journey that your firm offers.
Best Moments/Key Quotes
“I think the vast majority of brokers do a great job for their clients; they have the client at the heart of their business, and they're always working [in] the best interest of the client. And, in fact, the FCA recognise that. The FCA acknowledge that they see a lot of examples of good practice. [However], they're still seeing too many firms that are not looking after their customers.”
“When I look at consumer duty, what I see is really a continuation and an evolution of similar themes but […] the consumer duty seems to be much more outcomes orientated… it places a clear responsibility on firms to ensure that customers are receiving good customer outcomes all of the time.”
“It's a bit of a misnomer, calling it the ‘consumer duty’, because it might lead you to believe that actually, it just really applies to personal insurance customers. And that's simply not the case. It applies to all, in the FCA’s words, ‘retail customers’. Now, this definition includes both private individuals and also SME customers.”
“There's also a new conduct rule [which] sets out that all colleagues, not [just] the firm, must act to deliver good outcomes for retail customers. So, everyone who works in a broking firm needs to be able to adhere to that going forwards.”
“In terms of meeting the obligations, no firms should be starting from scratch. So, this is building on things that firms should already have in place for conduct risk or treating customers fairly.”
Resources
FCA – A New Consumer Duty: https://www.fca.org.uk/publications/policy-statements/ps22-9-new-consumer-duty
FCA – Financial Lives 2020 Survey: https://www.fca.org.uk/publications/research/financial-lives-2020-survey-impact-coronavirus
PIB Group | National coverage, local service
About the Guest
Tim Chadwick is the Group Chief Risk Officer at the PIB Group, where he has worked for the past three years. Previously, he has worked in various roles at Jardine Lloyd Thompson, Willis, and Aon. He began his illustrious insurance career at the Royal & Sun Alliance.
Tim’s LinkedIn Profile: https://www.linkedin.com/in/tim-chadwick-483b30/
About the Host
Sarah Myerscough is the Sales and Marketing Director of Boston Tullis Group. The founder of The Insurance Brokers Podcast, she brings a wealth of marketing experience and a fresh perspective on marketing in the insurance sector. Boston Tullis works with insurance brokers to offer solutions to business development ceilings, particularly in the rapidly developing fields of video marketing and thought leadership.
Website: https://bostontullis.co.uk/
Evaluation Link: https://s.bostontullis.co.uk/s/podcastevaluation
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