Some Thoughts on Consumer Duty Principle 12

Some insights from Gallagher Bassett UK;

The Financial Conduct Authority (FCA) introduced a significant regulatory change in the UK insurance industry on 31^st July 2023. The new Consumer Duty Principle 12, replacing ‘Principle for Businesses 6’, sets clear standards of behaviour for insurers. Insurers must not only comply with the regulatory change but also embrace a cultural transformation that places consumer needs at the forefront.

Beth Povey, Chief Compliance Officer at Gallagher Bassett UK, commented on the implications of these changes and how insurers can align with the Consumer Duty Principle to deliver positive outcomes for customers,

“Understanding the Consumer Duty Principle is essential for insurers to effectively prioritise their customers’ needs and act in their best interests.”

“The introduction of the Consumer Duty Principle 12 signifies a shift towards a more customer-centric approach in the insurance industry. This shift requires insurers to reassess their products and services, ensuring they align with customer needs, and actively enhance consumer understanding through clear communication, and offer adequate support throughout the entire customer journey.”

FOUR PILLARS

The Consumer Duty Principle 12 focuses on delivering positive outcomes for customers across four key pillars: Products and Services, Price and Value, Consumer Understanding, and Consumer Support. Each pillar represents a different time in the customer journey and should all result in positive outcomes for the consumer.

Beyond compliance, the Consumer Duty Principle brings about a cultural transformation for the industry to recommit to prioritising consumer outcomes and satisfaction.

“Through discussions surrounding the Consumer Duty Principle, insurers have recognised the importance of cultivating a culture that places consumer duty at the core of their operations. In navigating this landscape, insurers can build stronger and more trusting relationships with customers, while fostering a resilient and customer-centric future for the industry,” says Beth.

The introduction of the Consumer Duty Principle creates a significant shift in the insurance industry’s approach to customer service and consumer outcomes. Insurers must not only comply with the regulatory requirements but also embrace a cultural transformation that places consumer needs at the forefront. This transformation, coupled with the adoption of best practices, will not only ensure compliance but also foster a customer-centric ethos that benefits both insurers and consumers.