Customer Communications Digital Transformation

Consumer Duty 1 Year On

By Colm Dowd 18 October 2024

The Consumer Duty is a regulation to ensure financial services firms deliver good outcomes for retail customers. It requires businesses to prioritise customer interests, improve transparency and consistently assess the value their products and services provide. The Duty represents a significant shift in how the FCA expects firms to operate, raising the bar from treating customers fairly to proactively acting in their best interests.

It’s now been a year since its implementation for existing products.

The FCA has made it clear that compliance should be continuous – not a ‘once and done’ task. Now, firms are expected to apply these standards to closed products and services.

So what changes have we seen in the past year? And how has Consumer Duty impacted different sectors?

Let’s take a look.

Insurance

In the insurance sector, the FCA raised concerns about the fairness of certain products, notably Guaranteed Asset Protection (GAP) insurance. It suspended GAP insurance sales, citing issues with high commissions and lack of value. The message was clear: distribution and pricing must align with customer value.

The FCA also focused on motor insurance, particularly total loss claims. The regulator worked with firms to ensure settlement offers were fair and monitored effectively. Meanwhile, new rules were introduced to address issues with multi-occupancy buildings insurance to improve leaseholder outcomes.

The life insurance sector faced its own challenges, particularly in dealing with long-term products and disengaged customers. Over the next year, the FCA is expected to monitor whether life insurers are implementing the Duty effectively for closed products.

Retail banking

Retail banking also experienced significant attention from the regulator. The FCA’s multi-firm review highlighted several issues, including how banks handle accounts of deceased or incapacitated customers. Business current accounts and fraud prevention were other focus areas.

The FCA’s scrutiny of the cash savings market led to improved interest rates, reflecting the emphasis on fair value. From the end of 2023, these savings rate improvements were accompanied by a broader push for fair value assessments across banks and building societies, ensuring customers receive appropriate benefits from their accounts and financial products.

Consumer credit

The FCA focused on ensuring credit products are offered responsibly, particularly to vulnerable consumers. Affordability and suitability remain top concerns. The regulator has acted on motor finance commissions, calling for fairer practices that better serve customer interests.

The FCA also examined premium finance products and may take further action to ensure consumers aren’t overpaying.

Investments

The FCA emphasised the need for firms to review and justify fee structures. The costs associated with investment products must align with the benefits provided, and firms that failed to deliver fair value were required to refund fees, particularly those paid for annual reviews.

This year’s focus on transparency and cost justification reflected the FCA’s broader Consumer Duty goals of ensuring investment products serve customers’ best interests.

Looking ahead

The Consumer Duty allows the FCA to take quicker, more decisive action to prevent consumer harm.

As firms move into the second year, the FCA expects them to self-identify risks and act swiftly to address them. While most firms have implemented new frameworks to comply with the Duty, embedding a culture that consistently delivers will take time.

Stay compliant

In the coming months, firms should closely monitor FCA warnings and guidance to remain compliant. The expectation is clear – businesses must prioritise customer outcomes across all products and services, both existing and closed.

Get in touch for help with ongoing Consumer Duty compliance, including support embedding regulatory expectations. We’re here to support your journey towards delivering better customer outcomes.

See other posts by Colm Dowd

Head of RegTech

Colm has more than 17 years’ experience in Financial Services. A Programme Manager, Financial advisor, Contact Centre Senior leader, Technology and Risk Transformation Expert. Colm also has qualifications in Business, Finance, Project Management and RegTech from IOB, LIT, PMI and Cambridge University. Now leading exciting initiatives in Regulatory Technology at Engage Hub.

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