The Consumer Duty Act: Insurance and marketing impacts
Alex BurdenGroup Strategist
The FCA’s Consumer Duty Act will come into force on 31 July 2023 for new and existing products or services open to sale / for renewal, bringing a watershed for how financial services approach communications. How will insurance marketers need to respond?
Human behaviour underpins the Act
Under the Act, businesses and intermediaries will be expected to deliver a plan that is tailored to their business, but it’s clear there is a greater overall move towards considering human behaviour in plans.
The insurance sector is also facing an evolving spread of risks tied to geopolitics and climate change. Unexpected events are rising: riots, data theft, skirmishes, floods, fires, droughts and more. While insurers must identify these changing or entirely new risks, and how or if they will provide cover for them, they are also expected to maintain and improve standards of consumer protection.
The implementation of the Consumer Duty Act has come at a critical time, when the public are enduring a cost-of-living crisis and teetering on the edge of sky-high mortgages. Firms are being asked to take vulnerability into consideration, from poor health to cognitive impairment or even life events.
Any content marketing strategy needs to be fluid, scalable, and able to adapt to changing consumer needs
The Act also emphasises achieving good outcomes for consumers: the same consumers who may be turning away from insurance to save costs, while also trying to access credit under tighter affordability assessments.
Consumer Duty also establishes cross-cutting rules, including ‘avoid causing foreseeable harm’. Harm can be introduced through an act or an omission, so firms are prompted to respond to customer challenges when they become apparent or are notified of them, such as providing extra advice as required or any solutions that reasonably fall in the capacity of the firm.
With all of this in mind, any content marketing strategy needs to be fluid, scalable, and able to adapt to changing consumer needs. Editions has explored the key outcomes and rules that drive the Consumer Duty Act, and ways that marketers can integrate them to their plans.
Products and services outcome
As part of the Consumer Duty Act, firms are asked to understand and map the customer journey, especially where third parties or partner firms may impact it, with a view of end-to-end testing of products and services. This may also require collaboration with third parties.
The goal is ensuring products and services are fit for the purpose of meeting customer needs. Journey mapping should consider possible customer outcomes and when they may occur; determining what kinds of information is being supplied at each stage, and by who. This should be assessed for whether it may not contribute to a ‘good’ outcome.
What will you do?
Consider how customers, prospects and intermediaries are able to access information on products and services, and the ways information is presented. Is there a good mix of formats? What accessibility measures do they have? Could the information be collected into a hub?
Editions can support you to conduct an audit and mapping exercise of all marketing and sales information to determine how it may be influencing customer outcomes and contributes to a positive experience.
Price and value outcome
Fees and product costs should provide good value, benefits and contribute towards a good outcome. Marketing is unlikely to play a role in how these are set but can influence how the value and benefits are demonstrated, such as case studies.
An omnichannel presence is generally expected by consumers and clients, and as marketers, you will likely have a greater understanding of how people are using your channels
Consumer support outcome
Businesses should be assessing all their channels of communication:
- ensuring help and support is offered and available on the channels that customers and clients use.
- sourcing any friction points that reduce responsiveness (e.g. difficult to get in touch or long wait times).
Do you have a solution?
We recommend an audit of all channels in use to assess how customers are using them. Have customers expressed a frustration about not being able to establish communications on a specific channel? How long do they wait for answers? Are they aware of all and their specific uses? Could the audience benefit from a step-by-step guide on how to get in touch as well as providing a clear direction of travel to common questions and answers?
An omnichannel presence is generally expected by consumers and clients, and as marketers, you will likely have a greater understanding of how people are using your channels – useful information for your CTO and COO. You may also benefit from a third-party audit to gather an external impression of how the audience sees your channels and their utility.
Consumer understanding outcome
This outcome underpins a lot of the Consumer Duty Act – the audience must be able to comprehensively understand the communications so that they are properly informed to make the right decisions. Understanding must translate to a good outcome.
No customer’s needs and financial goals remain the same over the course of their life, and companies are expected to deliver for changing circumstances. What supports a good decision today may not support tomorrow’s decision.
Communications should not be geared towards producing the greatest number of leads without also being assessed for whether it produces the greatest amount of understanding.
Are you ready?
A closer working relationship between sales and marketing teams is a logical step in ensuring cohesive information, campaigns and levels of understanding. Companies must avoid creating a situation where a customer encounters more hardship.
You will need to think about potential behavioural biases, and how to avoid exploiting them. Using a credit lender example; if a campaign’s intent is to drive credit card applications, it must avoid targeting at people who are searching for debt help or are in a position of being unable to afford more debt. This also coincides with the new cross-cutting rule, to ‘act in good faith’ and not exploit biases while ensuring good outcomes.
Editions can support on the marketing aspects that play a part in behaviour in decisions, from reviewing channel strategy and brand guidelines, to tone of voice and language consideration. Diligent marketers may want to test language in focus groups to determine what contributes towards greater customer understanding and positive behaviours. Lead scoring models can also be adapted to ‘understanding’ scoring models.
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