The Chartered Insurance Institute (CII), in partnership with FWD Research, undertook a major survey of its members in July 2024 of those directly involved in Board reporting about the challenges they had encountered in producing the first Consumer Duty reports, including finding, reconciling or generating data.
Based on the findings from the survey and as subsequent round table discussion with insures and brokers, The CII has today (25th September 2024) published a White Paper that seeks to support firms’ compliance with the Financial Conduct Authority’s (FCA) reporting requirements under the Consumer Duty legislation.
Every regulated firm is required to produce a Board report, at least annually, to record its progress in achieving the best customer outcomes set by the FCA’s legislation. With the rules having come into effect in July 2023, the first Board reports were due by 31 July 2024.
The professional body found many survey respondents would benefit from assistance to better understand the characteristics of vulnerability and identify vulnerable customers. Those who attended the roundtable also said they would welcome advice on storing and sharing information on these customers, given the need to meet other legislative requirements, such as GDPR rules.
While some firms were worried about how much time was being invested in the reporting process, others said it had helped to shape internal conversations that had already driven positive changes for their customers.
Nevertheless, most firms said they would welcome more guidance from the regulator on how they should meet the reporting requirements.
The CII’s White Paper offers recommendations to help mortgage firms implement the Consumer Duty, ensuring optimal customer benefits. It outlines areas for further discussion with the sector and the FCA, including the effectiveness of current practices and the need for enhanced data management strategies.
In the coming months, the CII will introduce solutions to help mortgage lenders and brokers meet Consumer Duty requirements. The first initiative, in collaboration with FWD Research, will focus on top-down customer surveys to better understand vulnerability and develop strategic plans.
In his foreword, CII Group Chief Executive, Matthew Hill, said: “The Chartered Insurance Institute sought experiences of writing these initial reports to understand any challenges that might have been encountered, and to make recommendations that might assist other firms in future.
We are sharing our findings and recommendations with the FCA and the wider sector through this White Paper, and we will continue to explore with the regulator and our members what more we can do to assist firms in meeting the standards of care expected from the introduction of the Consumer Duty.”
Martin Grimwood, who leads the Consumer Duty consultancy at FWD, commented that “It’s clear that many firms have yet to understand vulnerability amongst their customers. Without a top-down view, which quantifies how prevalent different types of vulnerability is within a customer base, it is difficult for firms to create informed strategic plans that will meet the needs of vulnerable customers. We are delighted the CII have chosen to endorse our approach to understanding vulnerability and look forward to helping CII members implement this key requirement of Consumer Duty and Vulnerability Guidance.”
Areas the CII intends to discuss with the wider sector, including with the FCA:
- How well the Duty is serving the customers originally considered to be in scope, and whether any changes are required as a result.
- How we can collectively support firms to understand the characteristics of vulnerability and identify vulnerable customers.
- Whether we can support the production of more guidance to help firms understand what data they should be storing about vulnerable customers, for how long, and with whom it should be shared.
- Whether we can support the publication of interpretations of the Duty that relate to specific sectors (such as around data principles, good practice or codes) to remove ambiguity, encourage reporting consistency and generate greater sector efficiency.
- Whether we can support the introduction of a core set of metrics against which all firms should be expected to report as a minimum.
The CII’s recommendations to firms are:
- Firms should ensure that data and reporting requirements are used not only to satisfy reporting requirements, but are baked into product, service and process improvement cycles, as well as the design stage for new products, and are used to create the causal chain the FCA has identified as best practice.
- Firms are encouraged to work with professional bodies to develop research best practice, for example on survey methodology and the analysis of unstructured conversations, so that the benefit to consumers is as broad as possible.
- Firms should identify whether they have a robust understanding of vulnerability for their customer base that enables them to develop informed vulnerable customer strategies that will lead to good outcomes for all customers, including those with characteristics of vulnerability.
- Firms should place more emphasis on joining the data dots around individual customers or customer groups in real time, challenging assumptions and exploring data insights across multi-disciplinary teams to effect positive change for them.
- Leadership teams in firms should take active interest in reviewing customer needs for each of their entities, being the voice of the customer, to ensure continuously improving outcomes are prioritised.
