Do we need a more modern approach to addressing T&C?


In a previous article, we looked at the FCA’s focus on fair value and how regulated firms should invest in training to highlight the value they add within the distribution chain. However, in our work auditing the robustness of T&C schemes, we are finding that many firms are still not getting this right.

It is clear that the FCA will expect firms’ T&C schemes to deal with and deliver its expectations in relation to customer outcomes under the Consumer Duty, so:

  • unfairness;
  • customer service;
  • customer vulnerability; and
  • fair value.

The Regulator views T&C from the perspective of compliance with the relevant principles and the outcomes which firms will deliver to customers, as well as the specific rules and guidance. Consequently, it is appropriate for firms to view their T&C arrangements from a similar standpoint.  The key outcomes the FCA wants to see delivered to customers are those set out under the Consumer Duty, which is a wide-ranging, all-encompassing piece of regulation.  As such, practical and proportionate approaches are required for its implementation, and that includes T&C.

step back and think about how we get better at defining the true value of insurance as a service, and how we train our staff to understand the value of their service, and how ‘value’ van be achieved.


Looking at these subjects listed above, how does a firm meet the challenges of ‘training in’ vulnerability awareness, an appropriate service ethic, and an understanding of fair value?  And what is the value to you of training, in relation to delivering value to customers?  Let’s look at each of these themes.

Customer vulnerability

Customer vulnerability is again going to be an issue that the FCA focuses on in 2024.  In particular, in addition to considering how firms address vulnerabilities it has identified, it may start to look at what actions firms are taking to identify, monitor and support customer status change over time – so moving in or out of vulnerability.

The FCA’s view is that, and for firms seeking to ensure vulnerable customers achieve appropriate outcomes, it is not good enough that firms just have a customer vulnerability policy. This policy needs to go further than acquiring the customer, and also go further than any internal Vulnerability Champion or customer vulnerability team. Every employee who interacts with customers in any way will need to understand the policy and be able to spot vulnerability.

Firms will need to evidence that:

  • they screen their portfolios for vulnerability status change;
  • their policies ensure that vulnerable customers get good outcomes; and
  • that staff understand (so have been trained) about vulnerability status change and how to identify it.

Firms who have carried out some vulnerability training (hopefully not to just ‘tick a box’) may well themselves be vulnerable in the event of any FCA attention if their vulnerability training is not properly equipping customer-facing and customer-interactive staff.

Customer service

The FCA is increasingly talking about a link between appropriate levels of service (and also sensible and understandable information and communications) and the value that customers achieve from the products and services they buy.  This is demonstrating the FCA’s view that the four Consumer Duty outcomes are not silo requirements but are interlinked.

According to The Institute of Customer Service’s July 2023 UK Customer Satisfaction Index (UKCSI), 2023 saw record low levels of customer satisfaction across all sectors (not just financial services).   However, unlike other sectors, good levels of customer service are now enshrined in Consumer Duty regulation.

Firms which review the way that staff go about delivering their service, the speed and effectiveness of that service, as well as the ability to carry out what the customer requests, are likely to be able to demonstrate that their service offering leads to good service outcomes.  In turn, that will assist firms in demonstrating that they are providing value to their customers.

The concept of value

The FCA defines fair value as the relationship between the overall price to the customer and the quality of the product(s) and / or services provided.

Fair value is a key element of Consumer Duty, and the subject of much FCA talk in the last twelve months.  Recent communications from the FCA highlight that the regulator is likely to focus heavily on the value of products and services in 2024. So, it’s important that we all take some time at the start of this year to step back and think about how we get better at defining the true value of insurance as a service, and how we train our staff to understand the value of their service, and how ‘value’ can be achieved.

Whilst it’s easy to think that the FCA is purely targeting remuneration structures and the actual cost of insurance to the end consumer (i.e., estimating the monetary worth of the product), it is also important to consider the bigger picture in terms of what value means in terms of the service that is provided around the product being sold.

When we start to define the value of what our industry does, it becomes easier to correlate value with end cost, which is no different to how any other business in any other industry calculates its pricing and margins for growth. How you measure and define your true value is for your Board or most senior management meetings, it relates to how you run your business and define your culture. It can be a challenge, but we would urge you to begin this process if you haven’t already.

Future proof your T&C scheme

Some firms may be tempted to add a whole section to their T&C scheme to make a mirror image of the Consumer Duty requirements.  Firms must, though, remember that the FCA talks about proportionality, so Schemes should allow for the various stages of development of all of those that come under the requirements.

Firms should perhaps not measure success of T&C by the number of T&C Scheme breaches that are recorded, or the failure of some staff to meet development targets.  Under the Consumer Duty, and thinking about and focussing on outcomes, perhaps take the time to consider the positive consequences of the firm’s actions and the actions of the staff in implementing the Consumer Duty regime.  Recognise the people who take the time to identify and systems and controls which address any unintended consequences that arise.

There are many estimates and numbers published each week about the talent management crisis within the world of insurance. The workforce is shrinking, and we are struggling to bring in the next generation of insurance talent. This is causing a bottleneck of workloads as firms look to attract less experienced employees and this puts the whole distribution chain at risk of errors and poor service due to a lack of competency at the right levels.

We would encourage firms to look at their diversity and inclusion initiatives to focus on how they attract a more diverse workforce. As well as a focus on gender balance, firms should be looking at other inclusion factors such as disability.

Diverse workforces are like kaleidoscopes—each fragment contributing to a richer whole. Consider the benefits:

  • Consumer Insight: Diverse teams decode consumer behaviour, expanding our reach across markets.
  • Talent and Productivity: Inclusion fuels productivity, igniting innovation.
  • The Skilled Professional Shortage: Our industry grapples with a talent gap. Demand outpaces supply. Attracting fresh talent is a challenge.
  • The Unexpected Entrants: Many of us stumbled into this industry, not by design but by fate. Our diversity lies in our varied paths.

T&C finds itself at a crucial tipping point for regulated markets. We have never had so much choice in how we can access training and learning, however, far too many firms are not thinking hard enough about ‘the why’. It’s imperative that we approach it with a long-term lens of investment in the future for a whole host of reasons.

Whether your focus is on vulnerability, service, fair value or DE&I, it’s imperative that firms begin to collect and interrogate management information effectively so that they can make better informed decisions. Learn to challenge what the MI is telling you, and build the outputs into your T&C initiatives to drive positive change.


About Author

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Al Haughton Senior Technical Resources Consultant UKGI Learning Solutions. UKGI is one of the leading compliance consultancies to the general insurance, consumer credit and claims management sectors. We can help your business succeed, with the clear expert compliance advice you need in a complex and ever-changing regulatory environment. We provide a broad range of consultancy services that can be tailored to meet the specific requirements of your business and staff, including CII-accredited compliance workshops and webinars. Ensuring you adhere to the latest rules and regulatory best practice can be a complex and time-consuming undertaking for any general insurance business. It can sometimes feel like a burden, distracting you from your core focus on looking after clients. An experienced specialist consultancy like UKGI can lighten the load. We have over 15 years’ regulatory and compliance consultancy experience. So when you work with UKGI, you can rest assured you’re in safe and expert hands.

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