The FCA has published the results of its multi-firm review into Consumer Duty outcomes monitoring. Although the review concentrated on 20 of the larger insurance firms, the FCA's observations are relevant to all retail financial services firms and all firms should consider the review's findings.
What are the key takeaways for firms?
- Firms tend to concentrate too much on processes being completed rather than on outcomes being delivered. For example, reporting on whether there are overdue value assessments or product reviews, without providing any insight into the key findings, lessons learnt or actions to be taken.
- MI needs to be outcomes-based (not process-driven) and comprehensive enough to provide the board/committee with a clear view of whether the Duty's requirements are being met.
- Some MI lacks granularity and should be accompanied by sufficient information to allow adequate board/committee scrutiny.
- Board/committee reports should include clear presentation and explanation of data. For example, reports should include an explanation of what the data/metrics show and give recommendations or suggestions for potential action, particularly where poor outcomes are highlighted. Otherwise boards/committees cannot challenge effectively on the outcomes being delivered and the approach to monitoring being taken.
- Firms need to be able to demonstrate how the monitoring of outcomes directly leads to proactive action being taken to improve these outcomes (where necessary).
- Firms need to collect sufficient data to effectively monitor customer outcomes and should look at the examples of types of data provided in FG 22/5.
- Monitoring of outcomes experienced by distinct customer groups needs to be consistently demonstrated and should identify whether these groups get worse outcomes than other customers for the same product. Where a firm identifies different outcomes being experienced, further analysis or action then needs to be taken.
- Firms need to demonstrate that action is being taken as a direct response to any poor outcomes identified through monitoring or provide actions which show how an improvement to customer outcomes has been delivered.
- On products and services, there is too much focus on the number and timeliness of product reviews completed rather than the findings of the reviews. There is often not enough insight into customer outcomes or evidence of action being taken as a result of those reviews. Some firms are taking assurance that completion of product reviews automatically indicates that good outcomes are being achieved.
- On price and value, reporting focuses again on number and timeliness of value assessments being completed. Key aspects that determine the price a customer receives (such as commission or charges, operational costs or use of overall product benefits) are being missed in reports and MI lacks granularity and evidence of whether value is achieved for different customer types (e.g. age or vulnerability).
- On customer understanding, firms are reviewing existing communications to assess whether they meet the requirements of the Duty, but it is not clear they are also monitoring that those communications support good customer outcomes. Only a few firms could show clear monitoring of whether retail customers are equipped with the right information to make effective, timely and properly informed decisions.
- On customer support, all firms had customer service targets or SLAs in place. For some firms it wasn't clear how these targets were determined or how they could meet reasonable customer expectations for key journeys. Firms need to make sure they have sufficient information to monitor and identify and prioritise which actions to take.
What action should I take now?
All firms subject to the Duty should review their monitoring processes against the findings and act quickly if they identify any gaps in their compliance, putting robust plans in place to address any shortcomings. The FCA's report should also be used to support development of the first Consumer Duty annual report, due by 31 July 2024.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.