Martyn O’Connor, Head of Risk & Compliance, Premium Credit, takes a look at the Consumer Duty and what impact it will have on the insurance sector.
The final Policy statement on Consumer Duty was published last July by the FCA. In this much anticipated document the final rules and guidance for a new Consumer Duty set out higher and clearer standards of consumer protection across financial services and the additional requirements needed from firms to put their customers’ needs first.
The Boards or equivalent governing bodies of FCA regulated firms should now be aware of the clear plans their business has to implement the Duty properly and on time. The FCA did not expect firms to have necessarily fully scoped all work required to embed the Duty by the October 2022 deadline, but they did expect firms to have set out a plan that ensured an implementation. Firms’ plans should be sufficiently developed to provide both firms’ governing bodies and the FCA with assurance that the expectations set out in the Duty have been carefully considered and will be implemented for new and existing products by 31 July 2023.
At Premium Credit, we have broken down the policy statement and guidance paper provided in July into 11 workstreams including Customer Communications, Customer Support, Product & Proposition and Vulnerability to name a few. Each workstream has identified key deliverables that will enable us as a business to evidence the process and procedures we have in place to satisfy the requirements.
The golden thread, throughout the work being undertaken, is focused on our established purpose statement: “We proudly support our community of customers and partners in creating opportunities through convenient payments.”
Purpose is our true north that drives our strategy. A clearly communicated sense of ‘purpose’ acts as the underlying link between a healthy culture, the right business model and good outcomes for our customers. Putting the customer at the heart of what we do ensures we operate a compliant business model and can provide us with a competitive advantage.
THE CUSTOMER VIEWPOINT
Proportionality is key when applying the new requirements. What works for Premium Credit maybe totally different to a partner that has one or two employees. One place to start for any size business should be putting themselves in their customers’ shoes, asking themselves questions such as ‘Am I treating my customers as I would expect to be treated in their circumstances?’ or, ’Are my customers getting the outcomes from my products and services that they would expect?’. If the answer across any product, process or outcome is ‘No’, corrective action needs to be undertaken.
The Duty forms part of the FCA’s transformation to become a more assertive and data-led regulator. With firms assessing how they’re meeting their customers’ needs, the FCA believe they will be able to quickly identify practices that don’t deliver the right outcomes for consumers and take action before practices become entrenched as market norms.
The FCA have stressed, that the current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first.
By 30 April 2023 manufacturers should aim to complete all the reviews necessary to meet the four outcome rules for their existing open products and services and share information with their distributors to enable them to meet their obligations under the Consumer Duty by this same date;
by 31 July 2023, the Consumer Duty will apply to all new products and services and all existing products and services that remain on sale or open for renewal; and
by 31 July 2024, the Consumer Duty will come fully into force and apply to all closed products and services.