Modern Insurance Magazine Issue 62

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INSIGHT A GUIDE TO THE NEW CONSUMER DUTY By now, I’m sure that everyone in the insurance industry will have heard about the new Consumer Duty. New regulations kicked off on 31st July 2023, with the Financial Conduct Authority (FCA) going into overdrive to issue helpful guidance, letters - as well as playing host to a number of interesting podcasts and Q&As – in order to explain what’s needed. I, for one, welcome the new Consumer Duty. The Financial Services Authority commenced the regulation of General <strong>Insurance</strong> on 14th January 2005, and it all began with the principle of ‘Treating Customers Fairly’. This brief piece of commentary provides a springboard with which to further discuss my thoughts on the new Consumer Duty. Consumer Duty applies to everything that falls under FCA regulations – not just insurance, but also investments, mortgages, bank accounts, funeral plans, and so on. For insurance, this will be a progressive activity. However, for longer term policies, the new Consumer Duty will also apply in a retrospective sphere, and a ‘rear mirror’ approach will be needed to ensure compliance. In other words, does the product and service still work in the best interests of the consumer? Does it still provide fair value? This is a most interesting concept, but think of it like ongoing safety recalls on cars. Such evaluations can go on for several years in the event that a fault is discovered! So, if we have had the ‘Treating Customers Fairly’ principle for so long, why do we need to add a new principle, three cost cutting rules, and four outcomes? To refer back to the motor analogy, think of this as a very comprehensive instruction manual for a new car. It will show you how the product was made, how green it is, how everything works, what you need to do to enhance your driving experience, what happens if there is a blip… and then who you should address a complaint to! There will be copious detail included around design, assembly, testing, re-testing… the list goes on. Cars these days are incredibly complex, and likewise, insurance policies are hefty tomes. 8 | MODERN INSURANCE
INSIGHT Now the FCA has tasked us all with a massive collective challenge – design your products right, make sure it works, provide evidence that it is understood by the consumer, and show everyone that it does indeed work through a seamless and transparent claims process. Back to the beginning, then… When an insurer or broker comes up with a bright idea, we need to create a product or service for a certain type of individual or business, one that will meet their exact needs. So, what does the insurer need to do to deliver this to market, with a huge focus simultaneously on the delivery of key outcomes? In other words, how are we going to put the thing together so it is ready for the road? And we will know that beforehand, as the road testing is integral to the design, building of the prototype, etc? The new principle is simple. “A firm must act to deliver good outcomes for retail customers.” Wait, I hear you ask. What are retail customers? We have been used to this definition since 2005 - it does include individual policies, but nothing considered as a ‘group’. SME business is included, but large corporate business is not – meeting the ‘Large Risk’ definition instead. Why this doesn’t apply to everyone is beyond me, but anyway, I digress… Let’s focus on the four key outcomes… OUTCOME 1 Products and services must be sold or provided at a fair price that reflects their benefits. This is a two-part equation. How has the insurer priced the product, and is that fair? Then, what services will the broker (and anyone else in the chain) provide, and is the payment they get for this sale (the commission) also fair? If you think this sounds like the Product Value Assessments that took place back in September 2022, you’d be right. If we go back to the car analogy, think of this as the collection of glossy booklets, plus a shed load of other stuff from the manufacturer. Is it a special scheme, has it cut down benefits, have excesses gone up, and are there any additions to enhance cover? OUTCOME 2 Products and services that are fit for purpose - with terms and features that match the needs of the consumers they’re made for, and that work as expected. This is where the sharing of claims data is a must. Does the product actually work, and can the adviser use this to demonstrate efficacy to the prospective customer? Think of this as the test drive. Have we consulted with customers to gauge what they want, what works best for them, what’s important, and what’s less so? What is the customer prepared to pay for revolutionary new ideas? MODERN INSURANCE | 9
Page 1 and 2: ISSUE 62 ISSN 2515-3803 CONSUMER DU
Page 3 and 4: WELCOME Hello readers, Welcome to I
Page 5 and 6: 8 12 14 17 29 39 41 42 45 46 47 Ins
Page 7: EUROPCAR NEW BRAND BLOCK Color grad
Page 11 and 12: INSIGHT OUTCOME 3 Consumers are equ
Page 13 and 14: INTERVIEWS WITH MATT BREWIS consoli
Page 15 and 16: INTERVIEWS involve the FOS so much
Page 17: EDITORIAL BOARD Preparing Teams for
Page 21 and 22: EDITORIAL BOARD Embracing the New C
Page 23 and 24: EDITORIAL BOARD BASF UK x STEM: Cur
Page 25: EDITORIAL BOARD Providing Fair, Fle
Page 28 and 29: INVESTIGATION WITH REAL INSIGHT It
Page 30 and 31: Helping businesses make better deci
Page 33: ASSOCIATIONS ASSEMBLE Mike Benner T
Page 36 and 37: The future... of connected policy a
Page 38 and 39: Time to take a new approach. Repair
Page 40 and 41: Delivering happy, one policyholder
Page 42 and 43: NOMINATIONS NOW OPEN The Rum Wareho
Page 44 and 45: Two out of ten insurers are ready f
Page 46 and 47: FEATURES Dive In’s ‘Below the S
Page 48 and 49: I Love Claims www.iloveclaims.com C
Page 50 and 51: SHAPING THE FUTURE OF SUSTAINABLE M
Page 53: mins with... What is your most memo
Page 56 and 57: INSURTECH WELCOME Greetings, and we
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INSURTECH Benekiva Brent, how have
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INSURTECH Celent QJuan - I have fol
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INSURTECH ReSource Pro Consulting M
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INSURTECH JobsOhio QRon, it was won
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INSURTECH Emphasising the Policyhol
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INSURTECH Empowering Consumers: New
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INSURTECH André Symes, Group CEO,
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