YOUR COMPLIANCE MATTERS – FCA Dear CEO letter - Implementation of the Consumer Duty 

YOUR COMPLIANCE MATTERS – FCA Dear CEO letter - Implementation of the Consumer Duty 

Relevance:                   All firms

Action required:         Review FCA feedback against your own plans.

The FCA sent out a “Dear CEO/Director” letter on 3 February 2023, relating to the above issue.

A link to the letter can be found here Implementing the Consumer Duty in the General Insurance and Pure Protection sectors (fca.org.uk)

The letter provides a reminder of the requirements, although we do not intend to repeat them here (please see our previous newsletters on this topic).

However, in summary:

·      Remember the Consumer Duty applies to both Commercial and Consumer “retail” business. It does not just apply to personal lines insurance.

·      The implementation deadline is 31 July 2023.

·      The FCA has previously sent out guidance relating to customers in financial difficulty. The Consumer Duty has a particular focus on vulnerability generally, but the FCA is highlighting the fact that financial difficulties are a key issue currently.

·      Firms should already be complying with the Product Governance rules (which make up a large part of the new consumer duty requirement). It is worth checking that you are comfortable that you have everything in place in this regard.

·      Firms should be reviewing their communications with customers, and service delivery, in order to ensure that they are as effective and timely for mid-term changes, cancellations, complaints, and claims as they are for new business.

·      Claims processes and outcomes are a particular concern (the FCA point out that this is the point at which a customer actually receives the benefit of the product they have paid for). If you are dependent on any third party providers in this regard, you need to be supervising them very closely.

·      For firms with Appointed Representatives, bear in mind that you are responsible for their implementation and compliant with the consumer duty.

Supervisory Activity

From the reviews already completed by the regulator there are some issues that it believes need greater focus:

·      Effective prioritisation of implementation plans.

·      Effective embedding of the new requirements (too many firms seem to be assuming that their current processes will be compliant with some tweaking).

·      Liaison with other firms, where this is necessary, (again, the regulator has picked up issues relating to distribution chains).

Ongoing Supervision

Clearly, this particular issue is not going to go away, and the regulator is planning to engage with firms on an ongoing basis in order to check progress.

There is a particular reminder for Directors and Boards of Directors to challenge implementation plans as the FCA believes that this should be a key priority.