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PROTECT. LEGAL AND REGULATORY REVIEW JULY 2013. Oh No!!!!. Lunch 1.30. The Good News. It was only 8 weeks since I got you all nicely up to date So an “update” should be nice and quick. Lunch 1.30. And the Bad News?. A lot can happen in 8 weeks!. Why?.

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JULY 2013

Oh no
Oh No!!!!

Lunch 1.30

The good news
The Good News . . .

  • It was only 8 weeks since I got you all nicely up to date

  • So an “update” should be nice and quick

Lunch 1.30


  • Because FCA is on the warpath and it has only one thing in mind . . .

The Consumer Protection Objective

“To secure an appropriate degree of protection for consumers”

Fca will
FCA will:-

  • Expect you in your:-

    • Product design

    • Product name

    • Product content

    • Product marketing . .

    • Even the environment in which you offer the product

(c) Paginator Limited 2013

To set and then fully meet
To set and then fully meet . . . .

  • “consumer expectations”

Consumer expectations
“Consumer Expectations”

  • These are only partly under your control

  • Consumers are being encouraged on all sides to increase their expectations

  • The lives they are leading are changing rapidly, and

  • The regulator expects you to change with them . .

Thematic review into claims handling
Thematic Review into Claims Handling

  • Announced by Martin Wheatley at the BIBA conference on 15 May

  • “we are talking about enormously stressful periods in people’s lives. Touchstone moments”

  • “It would be very difficult, if not impossible, to defend any company if it was found to be aggravating these experiences by dragging its heels − or trying to wriggle out of its responsibility to pay legitimate claims. We buy insurance for peace of mind - not for a painful scrimmage with insurers”

What will the review cover
What will the Review cover?

  • “Themes across the general insurance market but with a particular focus on household and travel claims”

  • “We will conduct it in partnership with firms, as well as consumers”

  • “I want my team to obtain evidence directly from claimants on how they have been treated”

What is fca looking for
What is FCA looking for?

  • “Does customer experience vary according to whether they bought insurance directly, through a broker or through an affinity scheme?

  • How good are insurers in explaining up front what will happen when a customer makes a claim? How well do they then keep them informed of progress?

  • Are payments being made in a fair and consistent way when they are due? Are companies acting ethically towards their customers? Is the claims department as well resourced as the sales team?

  • Findings, and final recommendations, are expected by Q4 2013

(c) Paginator Limited 2013

What to expect
What to Expect?

  • A very different approach to that from the FSA

  • Much less technical – and generally less collaborative

  • Simplistic demands imposed on the industry but expressed in language addressed to consumers

  • The changes demanded will appear unarguable - but may well gloss over core commercial issues affecting your business

Why do i know this
Why do I know this?

  • Because of TR 13/2

  • Published late last month

  • What did it have to say?

Plenty of basic sensible stuff
Plenty of basic sensible stuff . . .

  • Product governance in firms is not “always” effective

  • “Aspects” of products were not designed to meet customer needs

  • Product terms were not “always” clear and fair to consumers

  • “Some examples” of poor sales practice

  • “In some instances” claims handling was slow and unfair

  • Some firms were not adhering to complaints handling rules

So the conclusion is that there is
So - the conclusion is that there is . . .

  • Some ineffectiveness, with some aspects of some products not being well designed, and not always being clear and sometimes being sold badly with instances of poor claims and complaints handling

  • Surely that means . . . .

There is a lot of
There is a lot of . . . .

  • effective, well designed, clear and well sold mobile phone insurance out there which, in most instances, delivers to consumers at claims stage?

  • So that is good news!

The review addresses some fundamentals very well
The Review addresses some fundamentals very well . . . .

Senior Management

Identify risk, compliance and cultural issues

Learning from complaints and feedback

Correcting operational shortcomings

Operational /Product shortcomings

Complaints and other feedback

Re-designing products/services to meet customer needs


Is that a professional way for a regulator to approach
Is that a professional way for a regulator to approach . . .

  • a key issue facing the general insurance industry in 2013?

  • How does an insurer define the risk covered, and set consumer expectation, in a world where consumers are no longer expected to read documentation or retain even basic understandings?

  • Put another way FCA should be addressing with the industry . . . .

Vital that
Vital that . . .

  • Firms and PROTECT engage with FCA to ensure that a desire to achieve “good consumer outcomes” is undertaken without FCA “showboating” to the consumer lobby

  • There must be dialogue (not bullying) to avoid the industry being put into impossible positions – and ultimately withdrawing from cover, because

  • If consumer expectations are constantly and unrealistically raised the outcome can be . . .

Now i have that off my chest
Now I have that off my chest . . .

What else
What else?

  • Some more on the Consumer Insurance (Disclosure and Representations) Act 2012

  • Some matters European

  • A bit about incentives, and

  • News of more consumer rights on their way

  • and . . .

Consumer insurance disclosure and representations act 2012
Consumer Insurance (Disclosure and Representations) Act 2012

  • The Act tells us that you can’t expect the consumer to tell you things unless you ask him/her about them

  • You can’t turn what you are told into a term of your insurance

  • FOS have issued a Technical Note which explains FOS’s approach following the Act (no change but useful)!

  • FCA are consulting on changes to ICOBS to reflect the new law

Matters european 1
Matters European (1)

  • IMD 2 – will eventually arrive

  • Lots of ticking bombs e.g. affecting claims, tying, commissions . . .

  • Damage and debris for your business will depend on matters of a few words here and there (still to be resolved)

  • Keep it well on your radar even though implementation likely to be up to three years off

Matters european 2
Matters European (2)

  • Protection Insurance

  • Conflicting movements within Europe

  • Some concern to “learn from” the UK (sales experience)

  • However a fundamentally different attitude to the value of payment protection insurance . . .

  • Driven by EU initiatives designed to give responsible consumers the confidence to borrow


  • FCA have announced:-

    • “further work on whether firms are now managing the risk of mis-selling, driven by financial incentive arrangements in place for their staff”

  • “further work” is to see if you are adhering to FG13/01 issued by FSA in January 2013

  • In that FSA reported 20 out of 22 firms assessed by FSA had features in their (staff sales) incentive schemes that increased the risk of mis-selling and were therefore in breach of the Principles for Business – and thus unlawful

What should you be doing
What should you be doing?

  • Checking that:-

    • products are sold to meet the needs of consumers, not driven predominantly by financial incentives and profits;

    • you properly identify, consider (and understand) how incentive schemes might encourage staff to mis-sell and put in place effective systems and controls “to adequately manage the increased risks of mis-selling arising from incentive schemes”;

    • “routine monitoring” of incentive schemes is not sufficient – nor are customer feedback surveys. You must have a full and effective risk based monitoring which looks for problems and corrects them

    • You are taking action to address any inadequacies

And be careful
And be careful . . .

  • Risks to customers from incentive schemes may also arise in areas such as complaints handling, claims processing and even customer retention

The consumer rights bill
The Consumer Rights Bill

  • Announced in the Queen’s Speech

  • A huge consolidation of consumer protection law including bringing the UTCCR into the new Act

  • Not just a consolidation of UTCCR – but introducing Law Commission recommendations on extending the law to cover the fairness of “core terms”

  • And that (with FCA’s agenda - and powers) is . . . .

So when i show you this
So when I show you this . . .

Senior Management

Identify risk, compliance and cultural issues

Learning from complaints and feedback

Correcting operational shortcomings

Operational /Product shortcomings

Complaints and other feedback

Re-designing products/services to meet customer needs


You not only need to think
You not only need to think . . .

  • about whether your current products are meeting (and designed to meet) consumer need and expectations; or

  • Think about the £2.8 million fine just given to PAS for failures to analyse root causes for complaints . . .

  • but also about what sort of product will meet and/or set consumer need and expectations in the future

  • Because you can be sure that this . . .

You can get
You can get . . .

  • These insights

  • Top quality legal and regulatory commentary

  • “Top up” niche legal, regulatory and compliance support, and even

Thank you
Thank You