Briefing: Insurers on red alert as FCA looks set to bare teeth over Consumer Duty

By Matt Scott

The new Consumer Duty regulations have already had a major impact on the UK general insurance (UKGI) marketplace and things could be about to get even more disruptive as we move into 2024.

At a recent Insurance DataLab webinar on customer experience in the age of Consumer Duty, compliance expert Claire Carpenter claimed that the FCA had “20 enforcement notices sat on their desk ready to go to insurers over the next quarter”.

She said that she “wouldn’t be surprised” to see these notices hit the Gap market – given the recent Dear CEO letter released by the regulator – or other ancillary products that might not be delivering the kind of value the FCA is now demanding from products.

It is easy to see why the regulator may be looking at the ancillary market – three of the five business lines with the lowest pay-out rates are being sold as add-ons.

This will be of concern to insurers.

In the past, the FCA has been more likely to fine distributors than insurers, but Carpenter’s warning means we could be about to see a change of tack from the regulator.

This means insurers need to ensure that they are doing all they can to not only ensure that their products are delivering value, but also that they can evidence that value if the regulator decides to come knocking on their door.

And this needs data.

Data

Insurance is, of course, built on data. Data is the very foundation on which the industry is based.

However, while risk and underwriting data is used extensively to price policies and set reserves, that same commitment to data is not always present when it comes to measuring the impact of policies on consumers.

Under this new regulatory regime, insurers need to know and understand where they sit on metrics such as the FCA value measures, complaints upheld rates, or simply what their customers are saying about them on review sites.

By benchmarking their performance across a range of customer experience metrics, insurers can get early sight of where there may be issues in their product offerings ahead of any regulatory intervention.

Having a working understanding of how others are performing in the market can also help with launching new products, as it allows insurers to understand what good looks like using objective data.

And given the FCA’s increasingly hardline stance on ensuring the industry is delivering value for its customers, having such insight is now more important than ever.