Insights ¦ The Road to Consumer Trust: Professional Standards in the Consumer Duty

Key Take Aways

• The FCA’s Consumer Duty necessitates a significant cultural and behavioural transformation within firms, elevating standards for customer care.

• Organisational culture plays a crucial role in achieving better consumer outcomes, with a shift needed from compliance to genuine customer-centricity.

• Conflicts of interest, incentives, and reward structures often undermine long-term consumer trust, favouring short-term financial gains.

• Data, technology, and AI are vital tools but require robust governance, transparency, and ethical standards to prevent misuse and ensure fairness.

• Boards and leadership must deepen their understanding of customer outcomes, vulnerability, and supply chain risks to foster trust.

• Addressing vulnerability requires proactive, data-driven, top-down strategies aligned with FCA benchmarks to identify and support vulnerable consumers effectively.

• Inclusivity and addressing unmet needs demand collaboration across policymakers, industry, and third sector bodies to reduce marginalisation.

• Consumer empowerment hinges on clear, accessible product information and better education at the point of purchase, renewal, and claim.

• Leadership and organisational culture often remain compliance-driven, risking short-term decision-making at the expense of long-term consumer trust.

• Consistent standards, benchmarking, and clear minimum thresholds remain lacking, particularly for smaller firms, which hampers continuous improvement.

• Market participants must move beyond merely meeting minimum standards towards leading with shared best practices that prioritise positive consumer outcomes.

• The article underlines the importance of a sector-wide approach involving sector regulators, professional bodies, and firms to embed higher standards.

Key Statistics

• 47% of customers are identified as vulnerable during claims, according to the FCA’s Financial Lives survey 2022.

• Firms tend to underestimate vulnerability, with their internal assessments typically much lower than external benchmarks.

• Over-reliance on regulatory reporting and compliance can detract from meaningful improvements in customer outcomes.

• A significant proportion of property claims are declined due to non-disclosure, often stemming from consumer misunderstanding or lack of awareness.

• Many firms’ focus remains on existing target customers, risking marginalisation of those with unmet needs.

Key Discussion Points

• How can firms align incentives, reward frameworks, and culture to prioritise long-term customer value over short-term financial gains?

• What is the role of boards and leadership in fostering an organisation-wide culture that genuinely understands and improves customer outcomes?

• How can data literacy and governance be enhanced across all levels of a firm to support ethical AI, fairness, and transparency?

• What concerted strategies can effectively address vulnerability and ensure equal treatment for all customer segments?

• How can industry stakeholders collaborate to reduce unmet needs and improve consumer access, especially where distribution channels may unintentionally marginalise segments?

• In what ways can organisations better measure, benchmark, and communicate service quality and settlement times to build trust?

• How should firms approach onboarding and ongoing education to improve consumer understanding of insurance complexities?

• What steps are necessary to transition from compliance-driven approaches to leadership in setting higher standards?

• How can regulators, professional bodies, and firms work together to establish and uphold consistent standards, especially for smaller and mid-sized firms?

• What behavioural changes are required among staff at all levels to embed a customer-centric, ethical mindset?

• How can technological advances be harnessed responsibly to deliver efficiencies while safeguarding fair and transparent outcomes?

• What practical interventions can support a sector-wide shift towards embedding professional standards that enhance long-term consumer trust?

Document Description

This article reports on a roundtable held at the Chartered Insurance Institute in autumn 2024, exploring how professional standards and organisational culture can support the realisation of the FCA’s Consumer Duty. It synthesises insights from industry stakeholders, highlighting challenges and opportunities related to incentives, technology, vulnerability, inclusivity, and leadership to foster a sustainable, trust-based insurance sector.