How will Covid-19 change what the FCA expects of insurance businesses?

FCA-regulation-and-the-new-normal-for-insurance-brokers

I think you’ll agree, there were no big surprises in the FCA 2020/2021 plan released in April. Top topics were; technology, fair pricing, broker remuneration, financial crime and culture.

The FCA said, “We will not compromise on our expectations of firms, particularly that they make consumers’ interests the foundation of their business models and behave accordingly.” That report was issued 3 months ago (at the start of lockdown) and the big question is, have the FCA priorities changed since then?

The way we work has changed. During the pandemic, the priority has been support.  

Many insurance firms have stepped up delivering technology and setting-up home-working, so customers still get good service.

People have changed. There is no doubt that the pandemic has had a profound impact on our economy and people too. Customers have become more risk-averse, needing more solid support and clear advice. People have become vulnerable; some have lost their jobs and the lockdown experience has impacted on the mental health of many.

We all need to adapt. The FCA has told us it will be focussing on operational resilience. This will look at the need for firms to “prevent, adapt, respond to, recover and learn from operational disruptions.” Such disruptions could affect your business or the people and businesses that rely on your service. This is something we should all be looking at now. Starting by looking at what was done during the pandemic, taking stock and looking forward. How do you think your business will change from here?

Whilst a lot has changed, the focus on customers should not. I would say that regulatory priorities are likely to remain what they always were, but it is a good investment if you spend additional time looking at:

  • How you use technology. Think about security, what you have learned from the pandemic and what works for your customers. Don’t forget those customers who don’t have internet access or don’t use devices.
  • Your operational resilience. Start working on scenarios and reviews.
  • The customer experience. The FCA focus is on customer outcomes. Take what you have learned from the pandemic and think about how the new normal for your customers. Look at their frontline experience – recent experience tells us how important this is.
  • Evaluate your social considerations. Think about your culture and employee welfare. Don’t forget that what has worked well in the short-term may not in the long-term.
  • Staff competence remains important. The FCA expects CPD/training to continue whilst staff are on furlough or working from home. Don’t assume the pandemic itself is grounds for an extension.

We should change but continue to keep customers at the heart. The FCA says it wants firms to “take the end outcomes for consumers and markets into greater account when they design and deliver services”. It’s all about the customer outcome and we now have a better idea of what matters to them. The FCA is going to be looking at how you do this. Not just your processes but how you make sure your customers get clear information, pay a fair price and can easily make a claim, or shop around for new cover.

Let’s challenge processes and resulting experiences. The traditional customer journey needs to be challenged. It’s previously been based on assumptions and firms’ processes. One assumption has been that people read information. People don’t read documents diligently and make decisions quickly. The number of customers who found (during the pandemic) they were without cover they believed they had, shows us the dreadful impact of customers buying cover they don’t understand.

Listen to your customers, address their needs and they will become your advocates. This is what the regulator wants you to do and let’s be honest, it makes good commercial sense.

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Sally Pearce's picture

Sally Pearce started Conduct Matters in 2014, after 35 years working in the insurance industry. She was originally an underwriter, but since 2000 has worked in dispute resolution and helping Insurance firms understand how to treat their customer fairly. Her experience includes working for the Financial Ombudsman, in the Lloyd’s market and dealing with regulators. Sally is ACII, a qualified mediator and yoga teacher. She is also available for public speaking.

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