Regulatory Priorities for Insurers - what firms should do next?

Actions firms should be taking in response to FCA priorities

Delivering a service that meets consumer needs

FCA focus areas include:

1. Analysing service quality indicators to determine whether firms are delivering good customer outcomes including the ability to respond promptly, fairly and transparently to queries.

Firms should consider:

• Whether their front-line service and complaints customer journeys are designed to support customer queries or complaints easily and fairly, without creating unnecessary barriers. This includes customers’ ability to cancel products easily and adjust levels of cover up and down.
• Whether front-line teams are appropriately resourced to enable customers to make contact easily and receive prompt responses by appropriately skilled staff. This is particularly important where vulnerability characteristics are identified.

Continuing to ensure that products deliver fair value

FCA focus areas include:

1. Ensuring premium finance continues to provide fair value for consumers.
2. Pure protection market study – focusing on products with lower claims ratios vs premium costs and analysing where there are incentives for intermediaries to switch customers unnecessarily.

Firms should consider:

• Ensuring material movements in product outcomes prompt action and ultimately where needed reassessment of customer value. This is particularly important where claims ratios are low or cancellation rates are high.
• Whether the sales process is designed to encourage intermediaries or customers themselves to churn from one product to another, and whether that activity impacts the overall cost to the customer.

Testing customer outcomes

FCA focus areas include:

1. Ensuring firms are testing outcomes across products, services and customer interactions to evidence they are delivering good outcomes aligned to regulatory rules.

Firms should consider:

• Whether their current monitoring MI is sufficient, does it pick up on all elements of Consumer Duty, looking at key risk and outcome indicators across the product journey, including outcomes across distribution channels and customer segments (including vulnerable customers)?Does it consider third party Appointed Representative/distributors or outsourced activity? Are firms including the right metrics to keep up to date with key movements in customer value data?
• Whether MI is being considered alongside outcomes testing results to provide greater detail on the outcomes being achieved.
• Ensuring there is clear governance around customer outcomes monitoring, ownership of actions and tangible improvement where there are dips in performance.

Reducing regulatory risk now

The focus of these regulatory priorities is staying vigilant around customer outcomes, and making changes proactively when there is evidence that customers are receiving a poor service, customer value is diminishing or there is evidence that customers are not receiving good outcomes.

Making sure firms have clearly assigned responsibilities for these activities and that everyone understands the role they play in relation to Consumer Duty is critical. What can seem like an operational problems or changes to drive cost efficiency, can lead to poor customer outcomes if not considered and managed effectively.

At a time when many firms are under pressure to drive functional or customer journey transformation, it is important to be considering a blended view across People, Process, Data, Technology and Regulatory requirements to ensure changes are considered from every angle.