The FCA defines a manufacturer as any firm which creates, develops, designs, issues, manages, operates, carries out, or underwrites a product or service. This definition is purposefully broad to ensure it encompasses all firms that may be involved in the design, launch or ongoing operation of a product or service. In addition, those managing, operating, or carrying out activities in relation to a purchased book of products or services would also be classed as a manufacturer.
Essentially, all firms which can “determine or materially influence the manufacture of a product or service”, such as essential features or elements, including the target market, will be considered a manufacturer. Therefore, any product or service may have multiple manufacturers, known as co-manufacturers. In this case, a written agreement must be in place outlining specific roles and responsibilities, so that it is clear which firm is responsible if any issues are raised.
Manufacturers must approve each existing or new product or service, as well as any significant changes that are proposed. Firms can assess whether a possible change would be ‘significant’ by considering, for example, whether features are to be added or removed or if changes are to be made to the target audience or terms and conditions, and the potential impact these changes may have. Firms should also be aware that, although small changes may not individually be deemed to be ‘significant’, multiple revisions, whether made simultaneously or over time, may amount to significant change. If the withdrawal of a product or service is proposed, the impact of this on consumer outcomes must also be considered, with the Duty in mind.
To be able to properly evaluate products and services, manufacturers must identify a target market (a group of customers with common features whose needs and objectives the product or service is designed to meet). Firms should consider the target market at a “sufficiently granular level”, examining aspects such as common characteristics, needs and objectives, risk profile, and complexity and nature of the product or service. It may also be useful to identify any groups within the target market for which the product or service would not be suitable. As an example, the FCA suggests:
“General insurance products might be designed to meet the needs, characteristics and objectives of customers looking to insure certain technological items. However, if these items are likely to be adequately covered by standard contents insurance, the target market should be refined to exclude people with existing cover.”
Except where a bespoke service has been developed for an individual client, manufacturers responsibilities apply at a target market level. Therefore, when identifying a target audience or groups within the audience, the FCA does not expect manufacturers to explore needs, characteristics, and objectives on an individual customer level. However, firms must consider customers with characteristics of vulnerability within their target audience by:
- designing products or services to take account of the needs, characteristics, and objectives of all groups within the target market
- considering whether a product or service has features that could risk harm for any group of customers, including those with characteristics of vulnerability
Considering product and service design with an inclusive approach may be an effective way to consider and meet the diverse needs of all consumers.
We will explore inclusive design, including development and testing, over the next few weeks.
RWA has launched a Consumer Duty gap analysis to help firms implement the new rules and guidance. If you would like more information about this or require any assistance in relation to the new Consumer Duty, please contact your RWA Business Manager. Alternatively, get in touch via email at helpdesk@rwagroup.co.uk or call 01604 709509.
