The Financial Conduct Authority (FCA) is one of the major bodies responsible for regulating insurers and other financial agencies. They set regulations that anyone who wants to sell, arrange, or advise on certain financial products must meet.

What is the FCA Consumer Duty?

The FCA’s Consumer Duty is intended to “set higher and clearer standards of consumer protection across financial services.” As part of this duty, firms are required to act to “deliver good outcomes for customers.”

You can read the FCA’s full introduction to the Consumer Duty.

When Does the Consumer Duty Come Into Force?

The new Consumer Duty rules came into force for new and existing products or services on 31 July 2023. The new rules will come into force for closed products and services on 31 July 2024.

In this post we’ll provide a brief summary of the new rules and share some tips on how best to implement them.

FCA Consumer Duty Rules – Four Key Outcomes

As part of the FCA Consumer Duty rules, firms must comply with four key outcomes concerning:

• Products and services
• Price and value
• Consumer understanding
• Consumer support

Let’s look at each of these in turn.

Products and Services

Firms should design products and services to meet the specific needs of their target demographics. This means accounting for the full lifecycle of a product or service, including its design, approval, marketing, ongoing management, and the customer’s journey when buying or using the product or service. It also means that firms should look to incorporate customer feedback into their product development and delivery.

Price and Value

Firms should be equipped to explain and evidence the value of any product or service. The price and value of any product or service should be an accurate reflection of its innate qualities and benefits. Firms must also undertake to continuously evaluate their pricing to ensure they’re always delivering good value for money to their customers.

Consumer Understanding

Firms need to effectively communicate with their customers across all channels – verbal, printed, and online. Firms must ensure they meet their customers’ communication needs, accounting for any special requirements. They must also ensure that, when making any product or service recommendations, the customer fully understands just what they’re buying. This means being as clear and accessible as possible when outlining benefits, costs, and associated risks, along with any actions the customer may need to take.

Consumer Support

Firms must provide good quality support, with an emphasis on providing early action for any customers who are struggling with debt. Once again, firms must ensure their communication and support channels meet their customers’ needs. Also, if a firm designs a product or service for a specific group, then they must make it clear that the product’s not for everyone.

FCA Consumer Duty Implementation Tips

• Audit your products and services. As part of the FCA Consumer Duty outcomes, firms may have to provide evidence that they’ve considered a customer’s best interests at every point of a product’s lifecycle. With some thorough auditing you can ensure all of your products or services are compliant with the outcomes. You may have to review customer feedback along with trust and confidence scores to identify any potential areas of improvement.
• Review your prices. The FCA advises firms to ensure there’s a “reasonable relationship between the price charged and profitability.” Do your prices accurately reflect the associated qualities and benefits for every product and service? If you’ve made any changes to any products or services, did you change the price accordingly?
• Review your communication channels. This includes all of your marketing channels. Are they effective at communicating with your target demographics? You should aim for total clarity, total accessibility, and total transparency on every channel, and at every step of the customer journey.

FCA Compliance – Further Guidance

You’ll find many guides on our site to help you understand and implement various FCA requirements:

• What are the FCA threshold conditions for insurers?
• The different types of FCA authorisation, and who needs them.
• A guide to the FCA’s 5 code of conduct rules.
• FCA rules for holding client money.
• What happens when FCA authorisation expires or is removed?

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