The new Consumer Duty has been described as one of the biggest shake-ups to financial services regulation in years and is designed to set higher and clearer standards of consumer protection across financial services, requiring firms to deliver “good outcomes” for customers.
Here at EDAM, we completely understand that meeting the new Consumer Duty standards can feel a little overwhelming, and there’s a lot of information to take in. But don’t worry, we’re here to help, and we’re committing that every action we take will help to support your compliance.
So, let’s take the time to look through this new Duty together, and make sure we’re all on the same page with what changes we need to be prepared for.
What is the new Consumer Duty?
The Financial Conduct Authority’s (FCA) Consumer Duty came into force on 31st July 2023 for existing products and services. It’s there to ensure that customers receive “good outcomes” and that firms provide evidence that these outcomes are being properly met.
The Duty applies to all firms who have a material influence over customer outcomes, not just those with a direct customer relationship, and also to products and services provided to consumers and retail clients.
What are classed as “good outcomes” by the FCA?
Under the Duty, firms should provide customers with products and services that meet their needs and always offer fair value. Customers should also only ever receive communications they can competently understand, and they should be able to access the customer support they need, when they need it.
This means to:
- Offer products and services which are suitable for customers.
- Provide clear information about products, terms, and conditions, so it’s easy for customers to make informed decisions.
- Respect all customers’ varied needs, including any in vulnerable circumstances.
- And offer genuinely helpful customer support which is easy to access.
But in the eyes of the FCA, this Duty is not just as simple as ticking these boxes, but it will instead become an integral part of our regulatory approach and mindset, and one which is mandatory.
What does supervision and enforcement look like for the new Consumer Duty?
Under the Duty, firms need to be able to prove that they’re acting to deliver good customer outcomes as the FCA will be ruthless when it comes to the risk of harm to consumers, prioritising the most serious breaches and acting quickly and assertively.
Firms can also expect the FCA to be robust in their action too, such as through interventions or investigations, along with possible disciplinary sanctions as well. And whilst it is appreciated that some firms will need to continually improve the way they use data and analytics to demonstrate compliance and the FCA will be pragmatic and open in working with them on this, the Duty is a regulatory compliance need, and will therefore it’ll be monitored closely.
How can firms make sure they’re meeting the new Consumer Duty standards?
The Duty is a major shift in the FCAs’ expectations, so it’s important that firms are asking themselves the right questions to make sure they’re on track.
To help, the FCA recently published questions for firms to consider as they embed the Duty. These include:
- Are you satisfied that your products and services are designed to meet the needs of consumers in the target market, and perform as expected?
- Do your products or services have features that could risk harm for groups of customers with characteristics of vulnerability? If so, what changes to the design of your products and services are you making?
- What action have you taken as a result of your fair value assessments, and how are you ensuring this action is effective in improving consumer outcomes?
- What data and intelligence are you using to monitor the fair value of your products and services on an ongoing basis?
- How are you testing the effectiveness of your communications and how are you acting on these results?
- How do you adapt your communications to meet the needs of customers with characteristics of vulnerability, and how do you know these adaptions are effective?
- What assessment have you made about whether your customer support is meeting the needs of customers with characteristics of vulnerability? What data and customer feedback is being used to support this assessment?
- How have you satisfied yourself that the quality and availability of any post-sale support you have is as good as your pre-sale support?
- Do individuals throughout your firm understand their role and responsibility in delivering the Duty?
- Have you identified the key risks to your ability to deliver good outcomes to customers and put appropriate mitigants in place?
These questions should help firms to reflect on their implementation of the new Consumer Duty, identify gaps or any address any areas for improvement. Firms can also expect to be asked questions like these in their interactions with the FCA directly, so it’s great to be armed with the right answers as soon as possible.
Meeting the new Consumer Duty standards throughout post-accident management services
Everyone at EDAM shares the same collective passion for service excellence, so much so that our mission is to continuously grow together, improving ourselves, our systems, our services, and processes to deliver best in class accident management services reflects in everything we do.
Together, our entire team have the knowledge and expertise to deliver best in class accident management services, and we’re proud to say that we have been partnering with Insurers, Brokers, MGAs, TPAs and CMCs alike for over 20 years. You can trust EDAM.
That makes us the perfect partner to ensure complete compliance is met within your business, adhering to the new Consumer Duty and delivering the services your customers need. To find out more about how we can help, reach out today.