Modern Insurance Magazine Issue 62

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I Love Claims www.iloveclaims.com Claims Essentials RISK & COMPLIANCE 15 November 2023 etc Venues, Manchester Consumers - more than just a duty Home & Property Claims CLAIMS CONFERENCE GETTING IN SHAPE NEW VENUE! Silverstone 30 November 2023 Motor Claims NETWORKING LUNCH 19 January 2024 De Vere Grand Connaught Rooms, London Motor Claims Home & Property Claims MGA Claims Essentials Sustainability
FEATURES The Unintended Consequences of Consumer Duty The Financial Conduct Authority’s Consumer Duty came into force on 31 July 2023. However, barely two months since its introduction, there are already worrying signs of unintended consequences. Consumer Duty requires firms to put customers first in every area of their business, as well as providing proof of having done so. Widely regarded as one of the most substantial regulatory changes to impact the insurance industry for decades, the regulations have demanded many insurers completely transform their claims strategies, products and selling policies in order to provide ‘fair value’ to customers. However, while the new regulations are no doubt well-intentioned, the ramifications could spell bad news for both insurers and policyholders alike. Crack down With the Financial Conduct Authority (FCA) promising to crack down on companies that fail to comply, the pressure is being applied to those working within the insurance sector. Already facing a severe skills shortage following the ‘Great Resignation’ that came about during and following COVID-19, insurers could find themselves facing an even greater challenge around staff retention. A study conducted by CoreData back in August found that 11% of financial advisors in the UK said that they were considering leaving the industry as a direct consequence of Consumer Duty. Worryingly, 35% said it was having a negative effect on their mental health, while 63% said it was hindering their ability to do their job. Nearly half thought the new regulations would do more harm than good. Fall-out If these findings are mirrored in the insurance sector, the fall-out could be stark. According to the Office of National Statistics, there were more than five vacancies for every 100 jobs in the sector in the second quarter of last year, while The Skills Shortages Report, published by ECI, found that insurers were facing the biggest recruitment challenge in the UK, with just 570 LinkedIn searches per month compared with over 46,000 job advertisements. However, the FCA has insisted that recruitment and retention problems will not be considered a mitigating factor in non-compliance, warning insurers that they need to ‘manage the issue before problems occur’. Resilience In a letter to CEOs last month, Matt Brewis, the FCA’s Director of <strong>Insurance</strong>, warned that a lack of operational resilience could impact an insurer’s ability to meet Consumer Duty standards. He said, “A significant part of our activity over the next two years will be to test firms against our priorities and expectations. We will also continue to use data to identify outliers and, where firms are not meeting our rules and expectations, we will take action”. Meanwhile, another unintended consequence of Consumer Duty could be higher prices for customers, with some experts suggesting that the operational costs of meeting the new regulations will be passed down. Who pays? Discussing Consumer Duty at the Defaqto Smarter Financial Decisions Conference in September, Jeffrey Mushens, Technical Policy Director at The Investing and Saving Alliance, said: “Who pays? It is always the customers. The firms will pay the initial costs, but this will eventually get passed onto the customers”. A report prepared for the FCA Practitioner Panel in 2021 appears to have accepted this. It acknowledged that complying with Consumer Duty would add ‘significant cost’ to firms, and said that ‘these costs will be passed on in some form, to either shareholders or customers. Where markets are competitive, the balance is likely to tilt more towards these costs ultimately being borne by customers.’ I Love Claims is set to explore the implications of the new consumer regulations and much more at its forthcoming Risk and Compliance themed event, ‘Consumers – more than just a duty’, taking place on 15th November in Manchester. Email Rachael Hunt to find out more: rachael@iloveclaims.com MODERN INSURANCE | 49
Page 1 and 2: ISSUE 62 ISSN 2515-3803 CONSUMER DU
Page 3 and 4: WELCOME Hello readers, Welcome to I
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Page 9 and 10: INSIGHT Now the FCA has tasked us a
Page 11 and 12: INSIGHT OUTCOME 3 Consumers are equ
Page 13 and 14: INTERVIEWS WITH MATT BREWIS consoli
Page 15 and 16: INTERVIEWS involve the FOS so much
Page 17: EDITORIAL BOARD Preparing Teams for
Page 21 and 22: EDITORIAL BOARD Embracing the New C
Page 23 and 24: EDITORIAL BOARD BASF UK x STEM: Cur
Page 25: EDITORIAL BOARD Providing Fair, Fle
Page 28 and 29: INVESTIGATION WITH REAL INSIGHT It
Page 30 and 31: Helping businesses make better deci
Page 33: ASSOCIATIONS ASSEMBLE Mike Benner T
Page 36 and 37: The future... of connected policy a
Page 38 and 39: Time to take a new approach. Repair
Page 40 and 41: Delivering happy, one policyholder
Page 42 and 43: NOMINATIONS NOW OPEN The Rum Wareho
Page 44 and 45: Two out of ten insurers are ready f
Page 46 and 47: FEATURES Dive In’s ‘Below the S
Page 50 and 51: SHAPING THE FUTURE OF SUSTAINABLE M
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Page 56 and 57: INSURTECH WELCOME Greetings, and we
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Page 64 and 65: INSURTECH JobsOhio QRon, it was won
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Page 69: INSURTECH Empowering Consumers: New
Page 73 and 74: INSURTECH André Symes, Group CEO,

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