The challenges and opportunities smaller brokers face as Consumer Duty deadline looms

With the FCA’s Consumer Duty deadline just one week away, the biggest challenge currently facing smaller brokers operating in the personal lines market is the “sheer scope” of the regulator’s demand.

That was according to Jackson Lee Underwriting’s head of leisure insurance Graeme Hamilton, who highlighted that while the FCA wants firms to put themselves in customers’ shoes, it ”means a massive amount of oversight at every level”.

He said that while firms often provide a “number of products and a number of methods by which they distribute” – whether that be online or via brokers – ”some people forget about the small brokers out there”.

”They will find it a challenge resource-wise,” Hamilton added.

Hamilton made the comments during Consumer Intelligence’s latest webinar – Navigating the Unchartered: Evolving Trends and Regulatory Challenges in Travel Insurance – last week (20 July 2023).

As part of the Consumer Duty, which comes into force from 31 July 2023, the regulator requires firms to ensure and evidence positive customer outcomes around four metrics – products and services, fair value, consumer understanding and consumer support.

One area that Hamilton felt brokers had a “big part to play” was improving consumers’ understanding of what was included in travel insurance policies, as “travel wordings have too much in them”.

“It’s not that they’re hard to understand per se because when you look at the different sections, it is straightforward what you are covered for [as] it’s written on a specified perils basis. So, it does tell you what you covered for,” he said.

However, he added that “there are a lot of sections where customers are put off”.

“We, perhaps as an industry, should focus on that,” Hamilton added.

‘Red flag’

During the webinar, Hamilton was joined by Consumer Intelligence’s chief executive Ian Hughes and insurance insight manager Max Thompson – the session was chaired by Consumer Intelligence marketing manager Scarlett Scott-Collins.

Thompson pointed to Consumer Intelligence’s survey, which found only 36% of respondents had read the fine print in detail of their policy for coverage related to Covid.

“That leaves two thirds saying that they’re either pretty sure, have no idea, or didn’t bother to check on that coverage level, so that raises a red flag of is it people not being able to understand their policy,” he said.

“But, asking about their policy document experience – 60% of people found their policy was clear and understandable.

“That’s really good news for the industry that the work that has been done on making documents clearer is being appreciated.”

‘Stunned’

Thompson noted that policies where Covid coverage can be more “complex” was in flight insurance, which focuses on “unrecoverable costs”.

Hughes, meanwhile, highlighted that one area that may cause confusion is determining whether a consumer would be covered by insurance if they contracted Covid abroad.

Hughes experienced an “incident recently” when he was due to get on a flight, but after testing himself discovered he had the virus.

Upon phoning the airline, Hughes found that he could delay his flight by a couple of days, but it would cost him £1,000.

To avoid the costs, despite Hughes expressing his concerns of airline crew and other passengers catching the virus, the airline said to “just wear a mask” and fly using his original booking instead.

“I was a bit stunned,” he said.

“Those are some of the areas where it all gets a bit grey as to whose responsibility is it, [as] the airline would have flown me.”