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Dear Chief Executive | Release Date: 11th January 2023

To read a shorter summary of this Dear Chief Executive, click here.

To access the original FCA document, click here.

Long Summary

The Financial Conduct Authority (FCA) is emphasising the integration of the Consumer Duty within the General Insurance (GI) and Pure Protection (PP) sectors. This letter aims to guide firms through the implementation process, highlighting expectations, the timeline for compliance, and the areas of focus to ensure the Consumer Duty is effectively embedded in operations.

Implementation Timeline

October 2022: Boards must have finalised implementation strategies.

April 2023: Manufacturers need to complete necessary reviews to meet outcome rules.

31 July 2023: The Duty becomes enforceable for all new and existing products or services.

31 July 2024: The Duty extends to include closed products or services.

This timeline underscores the urgency of adopting the Consumer Duty, especially important as consumers face heightened financial pressures, making robust consumer protections crucial.

Scope and Application

The Consumer Duty applies broadly within the GI and PP sectors to products and services offered to retail customers. This includes certain commercial customers where sector-specific rules apply, ensuring comprehensive coverage and consistent application across different consumer interactions.

Core Requirements of the Duty

Acting in Good Faith and Preventing Harm: Firms are expected to act in good faith, prevent foreseeable harm, and assist consumers in achieving their financial goals.

Product Design and Value: Offerings must align with the needs and objectives of a specified target market, ensuring that products and services provide significant value and facilitate consumer understanding.

Ongoing Support and Communication: Continuous support is essential throughout the product life cycle, complemented by strategic communication to enhance consumer understanding and empower decision-making.

Feedback from Implementation Plan Reviews

The FCA’s review of implementation plans revealed varying readiness levels among firms, highlighting the need for enhanced focus on product governance, communication strategies, and claims processes to meet the Duty’s requirements effectively.

Strategic Expectations for Embedding the Duty

The integration of the Consumer Duty demands significant attention from senior management, focusing on refining governance frameworks, ensuring communicative effectiveness, and optimising claims processes to ensure compliance by the upcoming deadline.

FCA’s Supervisory Approach

The FCA outlines a rigorous supervisory approach that will closely monitor how firms adapt their operational practices to meet the demands of the Duty. This approach is part of a broader strategy to elevate industry standards comprehensively.

Conclusion and Additional Resources

Firms are encouraged to deeply integrate the Consumer Duty into their business models and operational practices. The FCA provides resources, including guidance and educational webinars, to support firms through this transition. The expectation is clear: firms must not only achieve compliance but also fully embody the principles of the Consumer Duty in every aspect of their operations and corporate ethos.

Key Takeaways and Actions for Firms

Review and Discuss: Boards should thoroughly review the contents of this letter and discuss the implications for their specific operations.

Strategic Planning: Firms need to align their business strategies with the requirements of the Consumer Duty to ensure readiness by the set deadlines.

Focus on Product Governance: Enhanced product governance is crucial for ensuring that products and services are consistently aligned with consumer needs and provide fair value.

Enhance Communication Strategies: Firms must ensure that all communications with consumers are clear, timely, and supportive, enabling informed decision-making.

Optimise Claims Processes: The claims handling process should be consumer-centric, ensuring fairness and transparency throughout the consumer journey.

Engage with Resources: Utilise the FCA’s resources, including detailed guidance and educational webinars, to fully understand and implement the Consumer Duty.

Prepare for Supervision: Anticipate active supervision from the FCA, including potential reviews and audits, to ensure compliance and integration of the Duty.

This comprehensive approach will help firms not only comply with regulatory expectations but also enhance their operational effectiveness and consumer trust.

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