The Consumer Duty has become the biggest regulatory challenge facing the financial services sector since the Retail Distribution Review (RDR) a decade ago.
The good news is for companies operating in the health and protection sector, the new rules appear to have meant they have largely had to provide the evidence for the work they already do as opposed to launching any large scale change in behaviour.
Documentation and evidence
“For the last 18 months a dedicated project team has been working hard to ensure we are ready for the 31 July Consumer Duty deadline,” Paula Bertram-Lax, chief operating officer at LifeSearch, tells Health & Protection.
“Our teams have undergone comprehensive training and education on the latest regulatory requirements and guidelines, and we have dedicated significant resources to ensure we are well-equipped to navigate Consumer Duty.”
But Bertram-Lax adds for LifeSearch the incoming rules have been about providing documentation and evidence to support its day-to-day action rather than changing their actions themselves.
“The key will be to maintain these going forward and to continue a culture of customer first and evidence right behind it,” she added.
“We have conducted thorough reviews of our existing policies, processes and procedures to align them with the new regulations.
“We have also enhanced our transparency measures by providing clearer and more detailed information to our clients about the products and services we offer.
“Our aim is to empower customers with the knowledge and understanding necessary to make informed decisions regarding their financial resilience.”
Biggest challenge since ICOBS
Iain Laws, CEO of Towergate Health & Protection, describes Consumer Duty as the “biggest” change to the regulatory framework of the firm’s health and protection businesses since the FCA Insurance Conduct of Business Sourcebook (ICOBS) was first introduced.
“While there have been a range of other regulatory and legislative changes that have come into play over the last few years, these are more characterised as part of the ongoing evolution of managing a regulated business” he continues.
Laws explains Towergate conducted a complete review of its risk compliance framework through the lens of the Consumer Duty principle.
This meant building new elements into its customer experience and creating additional information gathering and reporting to strengthen the firm’s existing ability to demonstrate its customers are achieving optimum outcomes and are protected from foreseeable harm.
Alongside this, Laws adds Towergate has regularly been in contact with the FCA to shape how it implements its approach to the new rules, which it aims to be a benchmark for the industry.
But Consumer Duty has been just as much of a priority for insurers as it has been for advisers ahead of the today’s deadline.
Jennifer Gilchrist, protection specialist at Royal London, tells Health & Protection the mutual has looked over its whole protection business to review everything from design and development of products right down to how it supports customers and their understanding.
And in terms of implementation of the rules it has made a number of changes to support the new regulations and where appropriate go beyond the requirements to help achieve even better outcomes for customers.
Evolution rather than revolution
But according to Alan Sparks, group protection research and development consultant at Canada Life, protection providers are finding Consumer Duty to be “evolutionary rather than revolutionary”.
“Indeed, most protection products already fell within existing product governance and fair value rules and the FCA has had a focus on vulnerable customers for some time now,” Sparks continues.
“Consumer Duty aims to ensure good customer outcomes across financial services for the lifetime of products.
“Although regular product reviews have been in place at Canada Life prior to new legislation, Consumer Duty has given us the opportunity to demonstrate good customer outcomes and adapt by building on best practices.”
Though Christine Husbands, commercial director at RedArc, says Consumer Duty still presents challenges for both insurers and providers – particularly when it comes to value-added support services.
“In our experience, consumers often don’t know what additional services are available or how to access them,” Husbands says.
“Consumer Duty therefore means that providers and advisers will need to step up their efforts to communicate regularly and clearly in a variety of ways with consumers to ensure that services are used by those they were designed for.”