A summary of questions asked at our first Consumer Duty session on customer understanding – outcome 3

”What are you hearing regarding how firms are getting on with their plans, specifically outcome 3?”

The FCA has said that firms should have the bulk of their communication reviews done by the end of April, ready to implement by July. You need to start thinking about what your metrics are and what your risk tolerances are going to be.

Firms should start by thinking about conduct risk measures and how they need to be expanded, as they will effectively become Consumer Duty risk measures. So, understanding consumer behaviour, looking at complaints and business persistency (renewal) rates, first contact resolution rates, internal Q&A testing, surveys, and user interfaces will all be important data. For example, have your employees got the ability and confidence to deal with vulnerable customers?

Where you don’t deal with the customer directly, you will need feedback from your distributors within the chain. You need to know where people are asking questions and then measure that against your own group outcomes. What are the risk tolerances? What are you thinking is appropriate and what is not? If you can get your KPIs and risk tolerances in place, demonstrating to the board how you meet good outcomes will be easier.

Georgina Rose commented, “It’s not new. It’s been in the handbook for ages, but many firms haven’t taken it as seriously as they should have. You also have to remember principle seven: communicate clearly, fairly, and not misleadingly. In reality, this outcome is extremely difficult to implement and even harder to demonstrate in a compliance world. Many firms start with a blank piece of paper. What are the customer touchpoints? What are your new and existing comms, and what channels are the customers looking at to be able to implement a policy or make a claim?”.

”It sounds like firms have been spending much time on outcomes 1 and 2, getting their Product and Fair Value assessments complete, and are probably behind plan in terms of starting their Consumer Testing – required under outcome 3. What are we seeing played out now, regarding people now rushing to find 3rd party support to begin their testing programs?”

Many of these companies have known that their customer-focused communications and online journeys could be better, and they needed to be higher on their list of priorities. Now that they must do something quickly, it has been very overwhelming for many firms, and they are asking, ‘what do they need to do right now to at least cover the minimum?’

You need to consider the following:
1.     Mapping your key communications
2.     Identifying which communications are most important in terms of customer actions
3.     Prioritise ruthlessly and focus on the right things
4.     Remember your communications includes your website messaging, your emails, your IVRs (Interactive Voice Response), your scripts, as well as attachments such as policy wording or schedules you send to your customers

Example: Upcoming renewal
Your communication needs to let the customer know there are three things they need to do:
1.     Check to ensure that their details are correct
2.     check that the cover is still appropriate for them
3.     Check they are happy with the price

Consider whether the communication is sent in the best way (post, email etc.). What other messages are you including that might distract the consumer? Consider the document layout and format – things should be straightforward to find. Customers shouldn’t have to read multiple documents to get a clear idea of what they are covered for and how much it costs.

If customers aren’t responding to your communication, is it ok to assume they are happy and know their details are correct? It would be best to do more to ensure you deliver good outcomes and prevent foreseeable harm. For example, you can measure email open rates or send a follow-up SMS to ensure the consumer has seen this vital information.

Ideally, a renewal communication should be clear and properly sequenced so that it’s delivered at the right time, easy to understand and with clear calls to action. It is not just about language; it’s about how your communications drive the right behaviours and how you can prove that.

”What are the benefits of using an accreditation or recognised standard when completing customer understanding reviews?”

The FCA uses the phrase consumer testing; firms have taken this literally and have assumed that they need to put documents in front of customers – that’s not always practical, and the FCA will likely change their stance on this.

One perspective is that creating a fake environment for consumer testing can create odd behaviours. It has been suggested that people are generally overconfident, and they don’t like to look stupid. So, they may tell you they understand things when they don’t, so using a recognised standard or usability testing can often be helpful.

One form of consumer testing is to utilise a recognised standard that ensures that your communication meets some clear parameters defined by research around what consumers find easy or difficult to understand. You must meet specific criteria regarding reading age, jargon, sentence length, design features, etc. Most importantly, firms must demonstrate that their documents are clear and straightforward and deliver the proper outcomes.

Fairer Finance has worked with the ABI to produce a standard. The Fairer Finance Clear & Simple Mark recognises documents and websites written in simple language and clearly designed, so this type of accreditation shouldn’t be overlooked.

Another area to consider for consumer testing is the online journey. Usability testing helps to ensure that consumers can interact with your website or online journey without experiencing any friction or obstacles. This is a live environment with real customers. You can measure dwell times on pages or questions, you can see who is clicking on what links, and you can do AB tests. Several companies offer this service.

For further guidance and support, please get in touch.