Financial firms need to increase their focus on benchmarking their performance against their industry to ensure compliance against the new Consumer Duty regulations, leading insurance market insight business Consumer Intelligence says.
The FCA’s Consumer Duty, which comes into effect from July 31st, aims to increase consumer protection and promote fair practices in the financial services market. The duty requires firms to act in good faith towards retail customers, avoid foreseeable harm, and enable and support customers to pursue their financial objectives.
However, Consumer Intelligence warns too many insurers and other financial firms lack insight on their market position and would greatly benefit from a clear unbiased view on how they measure up, helping them avoid the perils of marking their own homework.
It argues understanding performance in the context of the wider market will help companies test internal assumptions, prioritise areas for improvement, boost competitiveness and demonstrate their commitment to delivering high standards for customers to the FCA.
Regular comparisons with industry averages also help companies track progress over time so that they are constantly improving and adapting to changing customer needs.
Catherine Carey, Head of Consumer Strategy at Consumer Intelligence says: “Having spoken to a cross-section of home and motor insurers, it’s disconcerting how many have blinkers on, taking a purely internal approach to measuring performance against the four Consumer Duty outcomes.
“At the very least, these firms risk scrutiny from the FCA as a result of marking their own homework. More concerningly, without access to the whole market view, they could be prioritising efforts in the wrong places, potentially leaving their performance exposed in other areas.”
In conversation with brands, Carey also became acutely aware of the lack of benchmarking insights available for measuring consumer understanding, and the challenge this presents for insurers when it comes to evidencing compliance.
“Our clients in the home and motor markets are more heavily focused on outcomes 3 and 4 of the Consumer Duty, having already ridden the storm of the new pricing practices and fair value assessments. The resounding feedback is that evidencing consumer understanding has been and continues to be the biggest challenge.”
In response to market feedback, Consumer Intelligence have been developing a solution that provides a clear, independent, and unbiased view of an insurer’s performance of their Motor and Home products for outcomes 3 and 4 of the Consumer Duty. The solution is due to come to market later this month.
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