Customer Duty: Opportunity to Repair Trust

In the second round of consultation into Customer Duty, the FCA stands by its decision to create new rules, rather than weaving this into existing principles. The new rules will come with higher standards and a higher cost. But as the regulator says, the benefits outweigh the outlay.

It seems that from the first wave of feedback from firms, many like ourselves at Arma Karma only see restoring consumer faith as a good thing. Instead of battling it out over price, with the FCA doing away with the practice of “price walking” at the start of the year, insurance firms’ sights can be set on how what they do serves the customer.

It’s hard to grasp why something that was always supposed to be for the customer needs new rules to ensure it circles back to that, but the focus is a welcome one from us and many other insurance companies.

One of the key changes the FCA would like to see is customers getting the information they need from the start, to make informed decisions. When working within the industry, it’s all too easy to forget that terms that are familiar to us, don’t mean much to our customers. Indeed, the concept of insurance as a whole is one that is alien to many of our customers, who fall into a young age demographic.

Like a broker looking to get the very best for their clients, we want the same for those visiting us and talking to us on live chat. If they don’t understand, we want to educate them. If our product isn’t right for them, we’ll tell them so.

This brings us to another area of consultation from the FCA. Ensuring that products and services are fit for purpose. Arma Karma was created on this basis, and we’ve built our subscription around the needs and behaviours of our customers.

And those needs are pretty basic; a product they understand, that works, and doesn’t cost a lot. We’ve spent many months painstakingly fine-tuning our customer journey online, so that people can sign up for our subscription in minutes. That smooth digital experience is important, of course, and we’ve seen a lot of positivity around the process via online reviews. But we’re putting even greater focus on how our customers can have a claims experience that surpasses their expectations.

At the moment, it seems like those expectations are spirit-crushingly low in our industry, but if the new FCA rules achieve their objectives, those expectations will have at least been restored, if not heightened, in the not-too-distant future. When we have a benchmark to strive towards, and we strive collectively to reach it, that’s where the greatest innovation happens as we learn from one and other.

We’re fortunate that as a start-up with a responsive capacity provider, we’re in a position to only grow from our initial mission of “transforming insurance for good”, and get a firmer grasp on the gripes and challenges of our increasing customer base.

For our initial demographic of 18-34 year olds, the things they have on their person while outside the house, items that are most likely to get lost and stolen, make up the majority of their assets, vehicles aside. The risk of theft is greater in some areas, and this is where individualising risk, which can be a plus point for encouraging responsible driving or helping people with previous conditions access health care, is clearly not right for our type of possessions cover.

By favouring pooling risk as opposed to looking at the individual, we can be confident we’re not pricing out the segment of the market who may already be struggling with the rising cost of living, and need their premium to be lower more than anyone else.

Whether the poverty premium will be factored into the FCAs proposed regulations or not remains to be seen, but it’s something we’d like to see them pursue. Access to products and services is addressed in the current consultation but stresses this is a commercial decision, only falling under the Consumer Duty remit if the sudden withdrawal of a product were to cause the customer a big headache.

Given the pros and cons of pooling and individualising risk according to the type of cover, it’s no bad thing the FCA hands the reigns on this matter over to the business.

If the intention is to root out bad practice leaving only those who are “in” insurance for the right reasons, access to products and services will be approached by all firms with their “customer-comes-first” hat firmly on. For us at Arma Karma, that hat has been a permanent fixture of our entire outfit from day one.