UK FCA Insurer Outcomes Monitoring

On Jun. 26, UK FCA reviewed insurer consumer duty compliance.

  • UK FCA published key findings from a review carried out in Dec. 2023 of larger insurance firms’ approaches to outcomes monitoring under the consumer duty.
  • Review Overview
  • Most recent board and/or committee reporting requested from 20 larger insurance firms including general/life insurers, insurance intermediaries, third-party outsourcers.
  • Asked firms to show how they monitor, assess, and test the outcomes customers are receiving, along with actions firms had taken after identifying poor outcomes.
  • UK FCA used assessments with existing supervisory knowledge of firms, to determine themes in firm approaches, identify good practices firms have employed to be consistent with consumer duty, assess if there are areas of improvement needed.
  • Good Practice
  • Some firms carefully thought about suite of metrics/data required to monitor customer outcomes in the context of their business and mapped against 4 duty outcomes.
  • Under the duty, firms are required to avoid causing foreseeable harm to retail customers and some firms had clearly articulated their approach to identification.
  • When firms documented key foreseeable harms related to a product or service, it helped them better determine data needed to monitor outcomes and avoid harms.
  • Emphasis on testing customer outcomes by better understanding customer journeys.
  • Some firms clearly articulated tolerances in place for all key metrics, with governance established to ensure they were set at an appropriate level and scrutinized annually.
  • Some firms integrate second-line scrutiny of how customer outcomes are monitored.
  • Demonstrated reporting of a wide range of data, and when outliers observed, a deeper risk-based analysis was conducted allowing the firm to identify areas for improvement.
  • Some firms combine a wide range of metrics and data to better understand whether good outcomes on customer support were being achieved.
  • Poor Practice
  • Some firms appeared to be reliant on metrics which confirmed the number/percentage of product reviews or value assessments, or other processes being completed.
  • Little monitoring of whether good outcomes being achieved re claim settlements.
  • Firms’ data strategies seemed to be largely based on repackaging existing data, with limited consideration of gaps or the outcomes it is intended to monitor.
  • Firms did not make distinctions between products when setting standards, tolerances.
  • Some firms place undue reliance on complaints data; lack of evidence showing that monitoring outcomes led to proactive measures being taken to improve outcomes.
  • Next Steps
  • All insurers, insurance intermediaries and outsourced service providers operating in the insurance sector should consider findings, incl good and poor practice observations.
  • Retail financial services firms in other sectors may also find these observations useful.
  • Firms that identify gaps in their compliance with our rules should act immediately, putting robust plans in place to address any shortcomings.
  • Effectiveness
  • The findings should be used when firms are considering approaches to monitoring outcomes on closed products, as required from Jul. 31, 2024.
  • May also support the development of first duty annual report, due by Jul. 31, 2024.

Regulators UK FCA
Entity Types CNSM; IB; Ins
Reference Gd, PR, 6/26/2024; UK CNSM DTY; ESG
Functions Claims/Accelerated Benefits; Complaints; Compliance; C-Suite; Legal; Operations; Outsourcing; Product Administration; Product Design; Reporting; Risk; Sales Practices; Suitability
Countries United Kingdom
Products Insurance; Insurance-Casualty; Insurance-Health; Insurance-Life; Insurance-Property
Regions EMEA
Rule Type Final
Rule Date 6/26/2024
Effective Date 7/31/2024
Rule Id 217383
Linked to N/A
Reg. Last Update 6/26/2024
Report Section UK

Last substantive update on 07/01/2024