FCA urges bosses to make Consumer Duty top personal priority in Dear CEO letter

The director of insurance supervision, policy and competition – consumers and competition, set out in a ‘Dear CEO’ letter issued on 3 February: “We expect the Consumer Duty to be a top priority for you personally.”

The duty comes into force on 31 July for new and existing products or services that are open to sale or renewal.

It applies to offerings to retail customers, and to all firms who determine or have a material influence over customer outcomes – not just those with a direct customer relationship.

The duty consists of an overarching principle and new rules firms will have to follow, the watchdog issued guidance in July.

Complacency

Last month the FCA warned against complacency with firms falling behind as the deadline looms.

Brewis reiterated the three areas where brokers should particularly focus their attention during the second half of the implementation period ahead of 31 July. He listed: effective prioritisation, embedding the substantive requirements and working with other firms.

One the final point he expanded that to implement the duty on time companies need to share information with other firms in the distribution chain.

“Some firms may need to accelerate their work on this important aspect of implementation,” he wrote.

“Firms should be considering where and how they work with third parties to deliver products and services to customers and making sure these arrangements will meet expectations under the duty.

“This includes other firms in the distribution chain and where firms outsource the delivery of services to other parties.”

Complex

Brewis noted that manufacturers and distributors in particular need to work together.

“General insurance and pure protection distribution chains can be complex and relationships can be challenging. However, it is also essential for firms to recognise this and to invest the necessary time and commitment to meet the requirements of the duty,” the FCA boss underlined.

Brewis acknowledged that most firms will have “significant programmes of work to implement the duty” and many have made good progress.

But he reported that many implementation plans were too high level in nature and lacking granularity.

“We expect you to contact us as soon as possible if you feel your firm will not be compliant by the July 2023 deadline,” he detailed.

Strategy

He updated that the FCA was working on developing a strategy for GI and PP sectors to embed the duty in its supervision work and tackle key harms, as well as metrics to measure the impact of the duty in the sector.

Continuing: “The areas highlighted in this letter are likely to be the primary focus of our future supervisory work. We may ask you for evidence of how you have made the necessary changes to your business in light of the duty and this letter, either in the course of our ongoing engagement with your firm, by phone call, or during a visit to your premises.

“You should expect to see us acting much faster and more assertively where we find firms not meeting the requirements of the duty.”

Survey

Brewis also revealed that the FCA will soon be surveying firms via an external agency.

“This anonymised survey will help us understand the progress firms are making in implementing the duty and will inform our ongoing communications to firms,” he concluded.

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