FCA takes no chances in implementing its Consumer Duty: what this means for insurers and intermediaries

As we flagged earlier this year, the FCA’s new Consumer Duty (the Duty) is perhaps the most important regulatory development in the UK this year. As we reach the FCA’s end of October deadline for firms’ boards to have scrutinised, challenged and ultimately agreed the implementation plan for this wide-ranging duty, the focus is turning to how to implement it in time for July 2023.

Staged deadlines

Firms will have been making sure that they have their initial Consumer Duty implementation plan ready and approved for the 31 October 2022 milestone. However, the FCA is keen to stress in their updates that the hard work starts now, in order for firms to have enough time to implement the Duty properly. The current implementation plan is not yet expected to cover all details of implementation for the Duty, but the FCA will not want firms wasting any time before filling in the finer details.

Manufacturers have another staging post to aim for: to be able to share necessary information with distributors of their products by 30 April 2023 for those distributors to meet their own obligations. The manufacturers will also need to be able to identify by then where changes are needed to products that are still on sale. This only leaves six months for a detailed review across all products and distribution channels - a challenging timescale even with the overall implementation delay the FCA have allowed. More time has been built in for closed products, to July 2024, in some recognition of the work that firms need to do first on their live products.

The staged deadline approach to implementation demonstrates the FCA’s impatience and their determination not to leave firms to their own devices in embedding their flagship initiative. Firms should be ready, if needed, to share evidence with the regulator of setting and achieving their own milestones between now and July 2023.

Application of the Duty and compliance

The Duty uses a wide interpretation of consumers as ‘retail customers’, a term which borrows the application of the insurance conduct rules to cover many commercial customers as well as individuals. A direct link to these retail customers is not necessary for the Duty to apply; wholesale firms are also having to consider carefully whether their products and distribution arrangements bring them within the Duty and its implementation requirements.

The FCA want to apply “higher and clearer standards of consumer protection” beyond the “lesser duties” of treating customers fairly. These standards build, in part, on the increased focus in recent years on product governance, fair value and individual accountability (as we have previously commented). Firms that already comply with the insurance product governance and fair value requirements should not need to change much of what they do in these areas to satisfy product and value outcomes. However, these firms will still need to look afresh, for example, at their communications with customers and the post-sale support for them. In addition, the FCA will expect the breadth of the requirements to act in good faith, avoid causing foreseeable harm and enable and support customers to pursue their financial objectives, to permeate all activity affecting a firm’s customers.

Internal governance

The FCA have consistently stressed the role of the board (or equivalent management body), not only in challenging and agreeing the implementation plan, but also in monitoring its actual implementation. Once the Duty is in force, firms will be required to ensure that acting to deliver good outcomes is in their strategies, governance, leadership and people policies. The FCA will still expect the board to take responsibility for the firm continuing to meet and embed the Duty standards.

An (at least) annual assessment of the firm’s delivery of good outcomes to customers is a key part of the continued role of the board. Firms should be prepared to take internal actions based on the conclusions of these reports and be ready to share the results with the regulator at any time.

The focus on the new rules is also underpinned by the individual accountability under the Senior Managers and Certification Regime. When seeking approval from the regulator, prospective senior managers may be asked about the role they will play in delivering good outcomes for retail customers. In addition, all customer-facing staff and managers will be subject to a new requirement to act to deliver good outcomes, as the FCA looks to direct a cultural shift in the way firms interact with their customers.


It is clear that the FCA is not content to let firms fit embedding the Duty into when it suits their business priorities and firms can expect the regulator to take a keen interest in their level of readiness in the coming months.

The shift in focus, from firms following principles and requirements to them delivering particular outcomes, has grown from a change in mindset by the FCA. It will need the same kind of recalibration from firms if they are to meet the expectations of a regulator that is set on making “lasting changes” to culture and behaviour. Firms that see the Duty simply as a new tool for the FCA to use in taking action on compliance failings will be unlikely to meet the high standards that the regulator now expects.

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