The Financial Conduct Authority (FCA) has identified fair value outcomes, including the impending pure protection market review, and claims handling within life insurance as part of its ongoing priorities for the Consumer Duty.
It will also be reviewing the outcomes for vulnerable customers across the industry and how outcomes are monitored.
The regulator announced four priority areas for the rest of the 2024/25 financial year, with a strong focus on strengthening the Consumer Duty and enhancing consumer protection.
The areas highlighted were: embedding the Consumer Duty and raising standards; enhancing understanding of the price and value outcome; sector-specific priorities and realising the benefits of the Consumer Duty.
Board reports and vulnerable customers
For embedding the Consumer Duty and raising standards, the FCA said it will assess across sectors how firms are implementing and complying with the regime.
The FCA said: “We want to understand how firms are improving consumer outcomes. Where we need more data and information from firms, we’ll only ask for what we need.“
That includes three cross-cutting projects which will be grouped into packages of publications in Q4 2024 and Q1 2025.
First will be a review of board and governing body reports and complaints and root cause analysis to assess how firms are responding to the outcomes monitoring requirements.
A review of treatment of customers in vulnerable circumstances will aslo be conducted.
The third project will be a review of consumer support outcome and supporting informed decision-making – looking at how firms support their customers across the customer journey and how they are using communications to support informed consumer decision-making.
The FCA said: “Where we identify good practice, we will share it.
“Where there are areas for improvement, we will remind firms of our expectations and set out where they may need to accelerate progress.”
But it added: “If we identify compliance issues, we will consider appropriate action.”
Approaches may differ depending on the size of the firm.
“We recognise different firms face different challenges. We want firms to take an approach that is proportionate to their size and to the activities they undertake. Where appropriate, we will set out different approaches smaller firms could take.”
Price and value outcome
On enhancing the understanding of price and value outcome, the FCA highlighted the work it will be covering during the market study into pure protection insurance.
It said it will use this to explore consumers’ engagement with and understanding of the pure protection insurance products they are buying, the competitive constraints on insurers and intermediaries, and firms’ incentives, behaviour and practices.
It also reiterated that the study will start in the first half of 2025.
More widely on the subject, the FCA said: “We know firms have found challenges in conducting fair value assessments and have questions about our expectations.
“We want firms to use robust analysis to assure themselves, and us, that they are offering fair value, and identify and take action where they are not.”
Other priorities include platform cash – the treatment of interest of cash balances – to tackle concerns about how investment platforms and SIPP operators deal with any interest earned on customers’ cash balances.
“We are engaging with firms where we have concerns,” the FCA said.
The FCA will also look at unit-linked pensions and long-term savings – and at the transparency of charges across the value chain and how firms assess overall product value.
Claims handling
The FCA highlighted that it has “planned work to tackle areas of existing concern in sectors across the rest of this financial year and into the next“.
“Firms should expect a general focus on their implementation and embedding of the Consumer Duty and customer outcomes as part of any supervisory engagement,” it added.
Specifically it will be putting a spotlight on claims handling in general and life insurance sectors, having completed its work looking at compliance with outcomes monitoring.
The FCA said it will focus on claims handling arrangements to understand insurers’ claims handling arrangements and whether systems, controls, governance and oversight structures drive good consumer outcomes.
It aims to publish those findings in Q2 2025.
The regulator has already given a significant warning to the life insurance sector over its handling of bereavement claims.
Other sector focuses
Other sectors to be considered include: retail banking, consumer finance, payments and digital assets and the clarity of foreign exchange (FX) pricing in payment services.
The FCA will also conduct work with a specific focus in retail banking on bereavement and power of attorney, linked to its wider review of firms’ treatment of customers in vulnerable circumstances, which will be published in H1 2025.
For consumer finance the FCA will assess digital journeys to consider whether firms’ digital tools sufficiently help consumers to understand credit agreements. It aims to publish those findings in H1 2025.
The FCA said it was also focussed on an advice guidance boundary review – to explore how the Consumer Duty could help to close the advice gap so that firms enable and support consumers to pursue their financial objectives and make key financial decisions.
The FCA aims to tackle poor identification of clients with characteristics of vulnerability by wealth managers. It plans to provide specific firm feedback in H1 2025 and take appropriate regulatory action if necessary.
And on sustainability disclosure requirements (SDR) and investment labels – the FCA aims to help consumers navigate the market for sustainable investment products.
The FCA expects to publish final rules on extending the SDR regime to portfolio management in Q2 2025.