The FCA, the UK’s financial services regulator, announced Wednesday January 11 that it intended to “update guidance” intended to ensure customers in financial difficulty are supported. But the day before brought news of a survey of 250 brokers who said they were feeling overwhelmed by new regulation they didn’t understand.

The FCA is keen to ensure that measures introduced during the Covid-19 pandemic to help customers facing difficulty are extended and more firmly embedded as the cost of living squeeze kicks in. The regulator wants insurers, for example, to “consider whether a different product is more suitable for customers facing financial difficulties and whether they should waive cancellation and other fees associated with adjusting customers’ policies”.

Safety net

Sheldon Mills, Executive Director, Consumers and Competition at the FCA, said: “Access to insurance is vital, providing peace of mind and security in case things go wrong. By extending our guidance we are helping consumers keep that safety net, and ensure they’re properly supported when they claim, even as the cost of living increases.”

A key part of the strategy is the new Consumer Duty, which places a duty on firms to deliver good outcomes for customers and demonstrate the provision of support to customers to help them pursue their financial objectives.

But in a survey carried out by Ecclesiastical Insurance and reported in Insurance Times, three in five brokers say they don’t understand how the Consumer Duty regulations would affect their business. And one in four said they saw their biggest challenge as demonstrating they are supporting their customers.

Insurers and intermediaries have until July 31, 2023 to implement the Duty for new products or products open to sale or renewal, with the deadline for closed products or services falling a year later.

Action taken

The FCA says it has already taken action to “make sure firms treat customers fairly and support those struggling financially”. This includes;

• reminding 3,500 lenders how they should be supporting borrowers;
• getting 32 firms to change the way they treat customers;
• securing £12m ($14.6m) in compensation from seven firms for 60,000 customers; and
• getting 8,000 misleading advertisements amended or withdrawn.

Ecclesiastical Insurance commercial director Adrian Saunders said firms will need to implement “a significant shift in both culture and behavior” if they are to comply with new regulations.

If the results of the survey are anything to go by, there is still some way to go. A trio of findings perhaps underlines the issues. Of the 250 brokers surveyed, 75% agreed that regulation was vital to achieve better customer outcomes, 73% said there was too much regulation, and 67% said complying with regulation put pressure on the business.