Only 8% of insurers are compliant with incoming FCA Consumer Duty regulations, just 9 months before the July 2023 deadline
43% of insurers believe they will not be compliant by April 2023, the FCA’s original deadline.
80% of decision makers at insurance firms believe new Consumer Duty rules will have a significant impact on their business
Only 8% of insurers are currently Consumer Duty compliant despite the first major deadline being just 9 months away, according to a new report from Open Data, Open Finance and payments platform Moneyhub. Indeed, Moneyhub’s research, undertaken by Opinium, showed that insurers are the least prepared for the incoming regulations compared to other sectors of the financial services industry.
When asked whether they would be Consumer Duty compliant by April 2023, the original deadline set by the FCA, 43% of insurers said they would not be, compared to one in three FCA regulated businesses across the wider industry. In addition, a further 43% of insurers said they were yet to start developing plans in response to the new rules despite the October 2022 deadline from the FCA requiring firms to have plans approved. This compares to 28% across the wider industry.
Worryingly, senior decision makers at insurance firms acknowledge the significant implications of Consumer Duty, with 80% saying regulations will have a significant impact on how they conduct business.
The FCA has described the Consumer Duty as a significant shift in its expectation of firms. Its objectives are to create satisfied and confident consumers, to provide a fairer basis for competition and the flexibility of an outcomes based approach to regulation, and to deliver a boost to growth and innovation.
In relation to the insurance industry, insurers will need to ensure their claims processes do not discourage or make it difficult for policyholders to make claims, that policy documents are easy to understand and are understood, and that changes to customers’ circumstances which might invalidate the benefits are acted upon. Consumer transaction data, available through Open Banking and Open Finance, can help firms better understand customers’ needs and characteristics, can be used to help firms identify customer vulnerability, eligibility for and affordability of a product, or changes to customers' circumstances which might prompt a review to avoid foreseeable harm.
Samantha Seaton, CEO of Moneyhub commented: “It’s disappointing that these new regulations are needed. It highlights that many financial services products have failed, and continue to fail, customers. We now have the opportunity to course-correct, not only for the benefit of the customer but for our businesses too.
“It has to be acknowledged that this isn’t a simple task. Consumer Duty means a complete overhaul of the way businesses interact with their customers. Not only must insurers evidence that their products are distributed to customers for whom they were designed and intended for at the point of sale, but on top, they also must continue to evidence this throughout the lifespan of a product. With many insurance products being long-term commitments, this will be a challenge, requiring the insurer to have a deep understanding of the consumer’s financial situation at every stage of the customer journey.
“Open Finance can provide a cost-effective solution to this challenge, as well as supporting other aspects of the regulation, from ensuring quality and timely customer support and communications, or providing the data to identify potentially vulnerable customers.
“I urge businesses to familiarise themselves with the legislation and compliance options. There are growth opportunities to be gained by firms that embrace the Consumer Duty and redesign products, customer journeys and users’ experiences.”
Contacts
Ingrid Anusic
Marketing Director, Moneyhub
ingrid.anusic@moneyhub.com
M: +44 783 722 6553
Eleanor Ross
Account Director, Teamspirit (Moneyhub PR Agency)
ERoss@teamspirit.uk.com
M: +44 7393 758 446
About Moneyhub
Moneyhub is a global ISO 27001 certified software developer of Open Banking, Open Finance, and Open Data applications. Its FCA-regulated Open Data platform enables companies to quickly and easily transform data into personalised digital experiences and initiate payments. Its APIs and fully customisable platform provide data aggregation, insights, notification nudges, and payment systems. As a result, clients have the consent-driven data and analytics they need to create super-personalised offers, products, and services. Hundreds of organisations, spanning finance to media and retail, rely on Moneyhub’s award-winning technology.
For more details, please visit www.moneyhub.com