The Consumer Duty, which the Financial Conduct Authority (FCA) enacted in July 2023, is a piece of regulation that makes financial firms prioritise 'good outcomes' for their customers in the design, pricing and delivery of their products.
The FCA has now scrutinised how 20 large insurers have kept track of their own compliance with the Consumer Duty, and actions they've taken to improve where needed. Last week, it published a review of its findings, which suggest many firms are still letting their customers down.
Here, we take you through what the FCA found, why it matters, and how to find an insurer that will treat you well.
Insurers fall short of FCA's expectations
Inconsistent self-monitoring
When it examined how comprehensively insurers were monitoring their customers' outcomes, the regulator found a 'wide variety in the quality of responses by firms', with many falling short of its expectations. It accused many insurers of:
Customer support failures
Scathingly, the FCA highlighted cross-industry failures to give customers the support they need, saying: 'We continue to see substandard service levels across insurance sectors'. It also pointed out shortcomings in the attention firms paid to the outcomes experienced by different groups of customers. For example, many insurers didn't look at customer outcomes by peoples' ages, the length of time they'd been customers, or if they had characteristics of vulnerability – such as being in financial difficulty or having low confidence managing money.
This follows on from the FCA's warning in July 2023, just prior to the Consumer Duty coming into effect, that insurers must improve their treatment of vulnerable customers and how they handle customers' claims. The regulator noted then that some firms weren't able to show that they were able to identify vulnerable customers in need of additional support.
Find out more:Why insurers must have robust monitoring in place
The Consumer Duty is a set of principles intended to put customers' needs at the heart of how financial companies operate. Firms must carefully consider customer outcomes when designing new products and services. They must also provide 'fair value', be clear in their communications with customers, and provide adequate support to their customers after purchasing their products.
Importantly, insurers must be able to demonstrate that they're complying with these principles. The first step in doing so is effective monitoring of customer outcomes to assess whether consumer needs are being met. Without appropriate monitoring processes, insurers will not know if their products and services are fit for purpose, delivering against the requirements of the Consumer Duty, and minimising the risk of consumer harm.
The latest in a string of insurance market failings
Last week's report is only the latest in a series of critiques the FCA has made concerning insurers' obligations under the Consumer Duty.
And in March, it published the findings of a review in which it found some car insurers to be systemically offering unreasonably low cash settlements to customers making 'total loss' claims. This applies to those whose cars have been stolen or written off.
Find out more:How to pick a good insurer
Between them, insurers deal with millions of customers, and no insurer will get it right 100% of the time. However, good insurers will pay attention to how their customers are finding their products and service. They will learn from cases where things haven't gone so well, and will adapt in order to minimise the risk of poor customer outcomes in the future.
The FCA's report suggests that many insurers are failing to get this right in the areas it examined, but it didn't name any names. This means that we can't use its review to highlight the providers to avoid.
However, in our insurance provider reviews, we look out for indicators of good and poor practice to help you make a decision about which providers to choose. These include claims and complaints statistics published by the FCA and the FOS. Before recommending any insurance provider or product in our reviews, we scrutinise available data. We won't endorse a provider where we've seen red flags against it in this data.
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source https://www.which.co.uk/news/article/insurance-firms-must-do-better-for-their-customers-says-fca-avEWk7C6zgA8