Consumer Duty deadline approaches

With just over two months to go, insurers are running short of time to ensure closed products comply with the Financial Conduct Authority’s new Consumer Duty rules.

The next FCA Consumer Duty deadline for insurance providers is 31st July 2024, at which point all products – those currently being sold as well as those still held by customers but no longer on sale – will fall under the regulation.

By that date, financial institutions must be able to show that even closed products continue to deliver good outcomes for customers.

The new Consumer Duty Regulations require an increased focus on customer outcomes, meaning insurance providers must move away from product-focused sales to customer-centric solutions.

Organisations also need to be able to collect and analyse customer data much more effectively to understand the specific needs and outcomes of those with closed products. With this understanding, they should be able to identify areas where these products might be causing harm in order to take corrective action. Transparency surrounding the value and impact of closed products will also be vital.

“The Consumer Duty regulations represent a shift towards a customer-centric regulatory model,” said Darran Simons of FICO. “Insurers and financial institutions can no longer simply ‘forget’ older products. This new regulation is relevant across all types of insurance products but is especially important on longer-term products such as life assurance, which can be held for decades after the product is withdrawn from sale. It is vital that insurers review their legacy products and assess whether they continue to deliver good and fair outcomes for those customers who do still hold these closed products.”

“To understand legacy product outcomes fully and accurately, insurers need robust decision management systems that enable them to analyse customer data from multiple choices. Explainable analytics can help organisations understand the historical factors driving customer outcomes and how those outcomes might change with time.

“Such analysis, coupled with AI models, will also help identify patterns that indicate the potential for customer harm within legacy product groups, enabling providers to take action before harm occurs. The need for better data-driven decision-making processes, supported by explainable AI models, will be vital to ensure compliance, protect customers and maintain a positive company reputation.”

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