At the very least, it is likely that the new rules will require businesses to re-tool their product governance process to make sure pricing and fair value considerations are given ample thought, and charges are proportionate.
And while the FCA has stressed it has no intention of becoming a price regulator – and so will not be explicitly intervening on pricing matters for the time being – it is also possible this issue could be subject to a dedicated thematic review further down the line.
In fact, we are already seeing the impact of this move in the insurance and intermediary markets, with the FCA’s new rules on general insurance pricing practices. These include assurances that existing customers are not quoted prices higher than those offered to newcomers – constituting a de facto ban on ‘price walking’ – as well as making it easier for customers to stop automatic policy renewals.
Not only that, but the GI guidance eliminates some of the perceived ambiguity by setting out a specific set of criteria for businesses to follow during value assessments. And crucially, it also reminds businesses of their obligations under the Equalities Act 2010 to ensure they do not discriminate on the basis of protected characteristics with their products or pricing.
Know-your-client mission creep
The duty puts a lot of emphasis on consumer support. Many of the proposed rules are geared towards understanding your clients’ common characteristics and anticipating situations where they may be exposed to risk.
And ultimately, this means greater care will need to be taken throughout the client lifecycle – beginning with how your products are designed and marketed, right up to ongoing support.
But what is not immediately apparent is just how much more due diligence will be expected under the incoming rules.
As we learn more about what the consumer duty will entail, it becomes clearer that having an implementation plan ready when the final rules arrive will be absolutely crucial to nailing the transition.
Ideally, you will want to ensure you are prepared to hit the ground running with your new obligations, while leaving enough flexibility to adapt to future updates.
Neil Dethick is associate director at TCC Group
