Approaching monitoring to drive forward good Consumer Duty outcomes: Consumer Understanding

In a previous article, we explored key takeaways from the FCA’s recent report which sets out the results of the regulator’s December 2023 review of larger insurance firms’ implementation of the Consumer Duty.

This weeks’ article is the third in a series exploring how firms can approach monitoring to drive forward each of the outcomes under the Duty- and evidence this to the regulator. Having discussed Price and Value last week, this week’s article will discuss how firms can approach monitoring in relation to the Consumer Understanding outcome.

Consumer understanding

“Monitoring must enable a firm to determine whether retail customers are equipped with the right information to make effective, timely and properly informed decision.”

The FCA noted that most firms had evaluated whether existing communications met the requirements of the Duty, and some had redesigned their communication review processes to ensure delivery of the consumer understanding outcome.

However, the report notes that it was unclear how firms were monitoring communications to assess whether they support good outcomes, and few firms could demonstrate effective monitoring of whether retail customers were being equipped with the right information to make effective, timely and properly informed decisions.

As observed throughout the review, the approach to monitoring across many firms was process-driven, with reporting focused on whether a communications review had occurred, or a renewal letter was sent on time, for instance. Many firms were found to be over reliant on the number of, or tends in, complaints, or net promoter scores, to evaluate customer understanding, but could not evidence that this monitoring had derived meaningful, actionable insights.

The FCA expect firms to monitor customer outcomes in a thorough and proactive manner. Firms should ensure that their approach to monitoring extends beyond the point of evaluating existing communications and associated review processes; outcomes received by customers should be actively and continuously monitored for any indication that communication could be improved, or that changes could enhance customer understanding and drive good outcomes. This may include monitoring whether customers are responding appropriately to information provided.

As emphasised in relation to other outcomes in the review, combining a wide range of metrics and data is the most effective way to assess customer understanding and whether good outcomes are being achieved, including insights such as:

• findings from communications testing
• testing involving both internal assessment (e.g. whether the firm meets the requirements of the firm’s communications framework, feedback from employees), and external assessment (e.g. feedback from customers and working with third-party communication experts).
• testing at targeted points during a customer journey (e.g. at point of claim)
• testing considered against analysis of foreseeable harms
• testing across different types of customer communications, e.g. call centre scripts –not just written communications
• findings from quality assurance work
• other feedback from customers, including customer surveys
• feedback from other parts of the distribution chain (e.g. sales advisors)
• various behavioural monitoring, including customer response rates following communications
• claims rates and claim decline rates in relation to customer understanding
• complaints data in relation to customer understanding including root cause analysis

The FCA noted that firms who combined a range of such metrics to build their approach to monitoring customer understanding were better equipped to take derive actionable insights and evidence that monitoring had led to meaningful adaptations and improvements.

Good practice was noted in who adapted internal Quality Assurance (QA) processes and methodology to focus on Duty outcomes, including firms who mapped a wide range of customer journeys to methodically test the customer understanding outcome across different parts of the journey. Some firms considered when and how to communicate with customers, often redesigning customer journeys, as opposed to adapting existing communications, and evidencing the implementation of processes to test the efficacy of changes made.

Ultimately, the findings of the review emphasise that a firm’s approach to monitoring should consider a range of data and metrics to assess the entire customer journey, fully evaluate customer understanding, and identify whether good outcomes are being achieved.

The importance lays in the meaningful insights a firm derives from the data it monitors; to proactively uphold the ethos of the Duty, such insights must be converted into improvements or adjustments made to actively drive forward good consumer outcomes.

This underscores the importance of firms considering that meeting Duty requirements is not a ‘once and done’ exercise which can be satisfied by evaluating and changing existing approaches and processes once. Instead, firms must use monitoring to continuously assess whether good outcomes are being achieved in practice and to determine where changes can be made to enhance customer understanding.

Additional Support 

UKGI can assist firms with measuring, monitoring and evidencing customer outcomes under Consumer Duty; if you have any questions, or need any support, contact UKGI Compliance at helpline@ukgigroup.com or on 01925 767888.

Given the continued focus on firms’ implementation of, and compliance with, the Consumer Duty, why not learn more as part of annual CPD requirements? @The Development Zone has a range of relevant courses suitable for all roles and levels, including: 

‘Consumer Duty: The Four Outcomes’ (Multi-module course)

‘Consumer Harm: Identification, Prevention, and the Consumer Duty’ (Multi-module course)

New to the Development Zone? Discover all of the system features, with no commitment, by signing up to a FREE 14-week trial: https://lnkd.in/eXfZ4-YV . Or, get in touch with the team at devzone@ukgigroup.com.