What is consumer duty? #
In the UK, consumer duty is a regulatory framework introduced by the Financial Conduct Authority (FCA) that sets higher standards of consumer protection across financial services. Rather than simply avoiding harm, firms must actively deliver good outcomes for their customers, ensuring people get products, services, and support that genuinely meet their needs.
This framework took effect in July 2023 for open products and services, extending to closed books in July 2024. Where it applies, the Duty supersedes the older Treating Customers Fairly (TCF) standards, specifically Principles 6 and 7, with a more proactive, outcomes-focused approach, though existing TCF guidance remains relevant context for firms. At its centre is a new Consumer Principle (Principle 12): "A firm must act to deliver good outcomes for retail customers." This applies to any firm that manufactures, distributes or services financial products for retail customers in the UK, including insurers, pension providers, banks, wealth managers, and intermediaries.
Three cross-cutting rules shape how the FCA expects firms to behave: act in good faith toward retail customers, avoid causing foreseeable harm to retail customers, and enable and support retail customers to pursue their financial objectives. These aren't aspirational guidelines. They're enforceable standards, backed by board-level accountability and subject to supervisory action where firms fall short.
Consumer duty in insurance #
Consumer duty applies to all FCA-regulated firms involved in retail insurance — from carriers who manufacture products, to brokers, Managing General Agents (MGAs) and appointed representatives who distribute them. Reinsurance is explicitly excluded from the Duty's scope. If a firm has any material influence over how a policyholder experiences a product, it's expected to contribute to good outcomes. That responsibility extends across the entire distribution chain and covers all Insurance Conduct of Business Sourcebook (ICOBS) policyholders, including many small and micro-business clients.
Here's how the Duty reshapes insurance practices across six key areas.
- Product design and governance: Insurers must design products for a clearly defined target market, and distributors must only sell them to the customers they're designed for. Both sides share data to review whether products deliver good outcomes throughout their lifecycle.
- Price and value assessments: Firms must prove that the total cost to the customer — premiums, fees, add-ons, and premium finance — is reasonable relative to benefits received. The FCA expects this to be backed by data like loss ratios, claims acceptance rates, and complaint volumes, not just statements of fair value.
- Consumer understanding: Policy documents, quotes, and renewal notices must be written in plain language. The FCA wants evidence that customers understood key features, costs, and exclusions, not just proof that documents were sent.
- Consumer support: Support must be accessible at every stage: onboarding, mid-term changes, claims, complaints, renewals, and cancellation. The FCA has flagged poor practice where cancellation is deliberately harder than sign-up or claims processes create unreasonable barriers.
- Board accountability and governance: Boards must approve an annual assessment of whether the firm delivers good outcomes. Until February 2025, the FCA expected firms to appoint a Consumer Duty Champion at the board level. This expectation has since been relaxed, giving boards greater flexibility to determine their own governance arrangements, though many firms have chosen to retain the role.
- Outcomes monitoring and evidence: Firms need management information dashboards that track outcomes across all four outcome areas. The FCA has criticized firms that repackage existing process data rather than measuring meaningful outcomes, and expects swift action where data reveals problems.
