Are you doing your part for consumers?

Last week, the FCA shared updates on how companies are following Consumer Duty guidelines. They focused on outcomes, particularly for vulnerable customers, and aspects like culture, governance, and monitoring.

The report highlighted both good practices and areas needing improvement. Sheldon Mills, FCA Executive Director of Consumers & Competition, emphasised the need for proactive measures, urging firms to assess product value, analyse data, and act promptly if they find any harm. This recent update, along with actions taken on GAP and potentially other products, demonstrates the importance of being proactive.

Some highlights from the FCA’s report that we believe firms need to pay close attention to:

Culture, governance, and monitoring:

• Good practice: companies align their goals with customer outcomes, develop new metrics, and ensure everyone in the business cares about customers
• Areas for improvement: some companies lack discussions at the board level, tend to react rather than act, and may overlook necessary data

Consumers in vulnerable circumstances:

• Good practice: companies consider vulnerability when designing products, improve communication for vulnerable groups, and ease pressure on call centre staff assisting vulnerable customers
• Areas for improvement: some companies struggle to track vulnerabilities, fail to identify and support vulnerable customers, and may use generic approaches

Products and services:

• Good practice: companies refine their product development processes, rethink their roles in distribution chains, and adapt products to better serve customers
• Areas for improvement: some companies don’t share information effectively across supply chains, pay little attention to distribution strategies, and lack awareness of their roles in the chain

Price and value:

• Good practice: companies assess total costs, enhance benefits, and ensure fair value across the distribution chain
• Areas for improvement: some companies fail to justify remuneration practices, add fees along the distribution chain that compromise fair value, and provide insufficient information

Consumer understanding:

• Good practice: companies improve communication across channels, being transparent about policy exclusions upfront, and updating materials for better customer understanding
• Areas for improvement: some companies are unclear about charges, and there’s a need for better consideration of Duty in financial promotions

Consumer support:

• Good practice: some companies ensure consistent support for all customers and align outsourced support with Duty standards
• Areas for improvement: some companies lack well-trained staff to handle complex customer conversations and may not understand customers in financial difficulty

GreenKite’s tips for improving customer focus and compliance

• Encourage front-line staff to share observations and ideas for improving customer outcomes. Board discussions on these examples can reinforce a customer-focused culture
• Reassess your approach to fair value assessments. Challenge existing practices and align with published FCA value measures data, focusing on the percentage of premiums paid out as claims (market mean average is 32.5%)
• Introduce HARD thresholds for key value metrics such as claims frequency and percentage of premium paid out as claims. This demonstrates a commitment to defining and upholding fair value standards
• Ensure that product assessments are supported by compelling evidence, utilising both internal and external data. Document all product changes, no matter how small, to meet regulatory standards
• Complete closed-book assessments by the end of July, allowing ample time for gathering qualitative and quantitative data and insights

Read the full Consumer Duty implementation report here.

If you have any concerns about conducting fair value reviews or feel you need to reassess your approach, GreenKite is here to help. We offer valuable training and support on Consumer Duty and fair value. Please reach out to our compliance team at [email protected] for expert guidance.