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What is consumer duty?

Consumer Duty is heralded as the biggest change to the financial regulations in the UK since the banking provisions in 2008, following the mortgage market crisis. Typically, financial services industry regulations are confusing and don’t make much sense to actual consumers.

This is something that we feel people should be aware of because of what it means for consumers and their rights. Here we’ll explain how it works in plain English and what it means in the real world for you and your family day to day.

What is consumer duty and how does it help?

Consumer duty was first proposed back in December 2022 by the Financial Conduct Authority (FCA). This is the regulatory body responsible for ensuring UK consumers aren’t mistreated by financial services businesses.

The FCA have worked for years to promote fair practices and to punish businesses who unfairly treat their customers.

Consumer duty takes this a step further, being referred to as one of the biggest leaps forward in supporting consumers in over 20 years.

These new regulations are intended to make sure that companies:

  • Promote fairer treatment for existing customers as well as new customers
  • Allow consumers to switch products/services with greater ease
  • Provide accessible and helpful customer support
  • Provide clear and understandable information about the products they sell
  • Only recommend the products most suitable for their customers

We will always get in touch to let you know if a better policy becomes available, even if it’s years after you bought your current one. This is something we hold as a key company value, as our top priority is putting our customers first.

How does consumer duty work?

Consumer duty works to make sure businesses always put the customer first. This means it will be far harder for consumers to be unfairly treated or misled by financial services businesses.

There are a lot of new requirements for businesses to thoroughly review their processes.

This includes:

  • Regularly monitoring customer communications to ensure all information is presented clearly, so the customer has a full understanding of the product they are buying
  • Having arrangements in place to help deliver ‘good outcomes’ for all customers
  • Having detailed documents and procedures in place to identify and assess any potential risks to customers

With a lot of new documents to draft, these are some big changes for the financial services industry – so the FCA doesn’t expect this all to happen overnight.

FCA consumer duty summary – how does it help customers in the UK?

In the FCA’s consumer duty implementation plans, they have stated that consumer duty means:

“Consumers should get communications they can understand, products and services that meet their needs and offer fair value and they get the customer support they need, when they need it”

Sheldon Mills (FCA Executive Director of Consumers and Competition) has referred to consumer duty as a ‘major shift’ in financial services and said:

The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first”.

This is something we wholeheartedly agree with. Consumers should always be treated fairly and having extra measures in place to make this happen can only be a good thing.

Useful resources

FCA – Consumer duty

FCA – Consumer duty implementation plans

FCA – FCA’s Consumer duty will lead to a major shift in financial services

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