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Consumer Duty Explained

This is a basic guide to the Consumer Duty rules that are effective from 31 July. For detailed guidance on the rules, visit https://www.fca.org.uk/firms/consumer-duty 

Brought in and overseen by the Financial Conduct Authority (FCA), the Consumer Duty introduces a new set of rules and guidance aimed at setting higher and clearer standards of consumer protection across financial services and ensuring customers’ needs are put first. The core principle is that firms must act to deliver good outcomes for retail customers.

Firms must take all reasonable steps to avoid causing foreseeable harm to customers; enable and support customers to pursue their financial objectives, and act in good faith. 

“It will mean that consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.”

FCA, 22 July 2022 

The Duty includes requirements for firms to:

  • Make it as easy to switch or cancel products, as it was to take them out. 

  • Provide helpful and accessible customer support. 

  • Provide timely, clear, and understandable information about products and services, so that people can make good financial decisions. 

  • Provide products and services that are right for their customers. 

  • Focus on the real and diverse needs of customers, including those in vulnerable circumstances.

The FCA expects the Duty to lead to: 

  • Communications to equip customers to make effective, timely and properly informed decisions about financial products and services. 

  • Products and services that are specifically designed to meet the needs of consumers and sold to those whose needs they meet. 
  • Customer service meets the needs of consumers, enabling them to realise the benefits of products and services.  
  • Pricing of products and services represents fair value for consumers.

Firms are responsible and accountable for complying with the Duty. A key part of this is that firms assess, test, understand and evidence the outcomes their customers are receiving. The FCA will monitor how firms use data and analytics to demonstrate compliance. Where serious harm, or risk of harm occurs, firms can expect the FCA to take robust action, such as interventions or investigations, along with possible sanctions. 


What Difference Will I See?

The new rules build on and enhance the existing work of our members to deliver good outcomes for customers, so don’t expect a ‘big bang’ from 31 July.

Some of the rules (like those relating to value for money) have been in place for insurers for some time.

This Duty is partly about putting other financial services, like banks, on an equal footing so that consumers can expect good outcomes from all their financial products.  

Are Firms ready?

Our members have been working hard to ensure they comply with the new requirements, including reviewing their customer materials, and ensuring staff understand the new requirements. 

Why Have These Rules Been Brought In?

Parliament required the FCA to make changes to meet concerns raised by consumer groups and Members of Parliament. The FCA has said that “the Duty raises the bar for the firms we regulate...”

We support the Duty, as it builds on the ongoing work of members to further improve outcomes for customers. 

Will This Mean That My Premiums Will Come Down?

The Duty covers whether products represent fair value for money, but it will not regulate the actual price of insurance.

Premiums charged will continue to remain a commercial decision for individual insurers, reflecting a variety of factors, including claims and operating costs.

Firms must ensure that the products they provide offer fair value for customers – are they providing a good quality service at a reasonable price? If the FCA believe that insurers are not doing this, then they can intervene. 

Will It Address Insurer Admin Charges, such as Mid-term Cancellation Fees, Premiums Paid by Instalments?

The Duty will not regulate what an insurer may charge for specific product features like different types of charges. But firms will need to show that any charges are reasonable, reflecting any extra costs incurred, and that they meet the price and value outcome. 

How Will it be Decided What Good Outcomes Mean in Practice?

The FCA has published extensive guidance for firms. Firms will be responsible for ensuring that they comply with all aspects of the rules. The FCA will publish further guides to good and poor practice as new examples of these come to light.

How Will Compliance be Monitored and by Whom?

The FCA will oversee the implementation and operation of the Duty. Firms need to show that they comply with all aspects of the rules.  

What Can I Do if I Think My Insurer is Not Complying?

Speak to your insurer in the first instance. They will be able to help and investigate where necessary and can give you details of their complaints if you decide you want to complain.

If your complaint is not resolved to your satisfaction by the insurer, you can take your complaint to the independent Financial Ombudsman Service free of charge.  

Does the Consumer Duty Apply to All Financial Products and Services From 31 July 2023?

The Duty is not retrospective. It will apply to existing products and services and to any future sales of products and services from 31 July 2023. 

For legacy products that are no longer available for sale to new customers, the rules will take effect on 31 July 2024 as it will take longer for firms to review these products.