Markel is dedicated to Consumer Duty as defined by the Financial Conduct Authority.
Author: Markel UK
What is Consumer Duty?
The Consumer Duty is a large regulatory change initiated by the Financial Conduct Authority (FCA) that sets out higher and clearer standards of consumer protection for financial services firms. The Duty requires firms to take action to deliver Good Outcomes for customers, taking into consideration the needs, characteristics and objectives of their customers. The Duty not only requires firms to act to deliver Good Outcomes at every stage of the customer journey, but also to understand and evidence how Good Outcomes are being met.
The Consumer Duty comprises of:
- A new Consumer Principle: “A firm must act to deliver Good Outcomes for retail customers”
- Cross-cutting rules providing greater clarity on the expectations under the Consumer Principle, requiring firms to:
- Act in good faith
- Avoid causing foreseeable harm
- Enable and support retail customers to pursue their financial objectives
- Rules relating to the four outcomes that the Duty intends to achieve:
- Fair value: consumers receive fair prices and quality
- Suitability and treatment: consumers receive suitable products and services and receive good treatment
- Confidence: consumers have strong confidence and levels of participating in markets
- Access: diverse consumer needs are met
- Extending the FCA “Individual Conduct Rules” to require all staff to ‘act to deliver good outcomes for retail customers’. This means that all staff have a legal duty to be proactive and take action to achieve the requirements of the Duty in their own roles. If something goes wrong, members of staff who cannot demonstrate they acted to deliver good outcomes could be subject to individual regulatory sanction. The FCA aim and expectation is that all staff take their duties under this regulation seriously and Markel expects the same.
What is the aim of Consumer Duty?
The FCA has designed the Duty to deliver a cultural shift across financial services, raising the bar on market practices and how firms place the customer at the heart of their decision-making. The aim of Consumer Duty is to achieve a higher degree of protection for consumers as well as to create a more consumer-focused competitive market in which firms have the opportunity to compete and innovate in pursuit of Good Outcomes.
The Duty aims to ensure that customers:
- have access to products and services that are designed to meet their needs and offer fair value; and
- are supported to make effective choices to pursue their financial objectives
How does Consumer Duty apply to Markel?
The Duty applies across all sectors providing financial services to retail customers and all firms that can determine or have a material influence over customer outcomes. The FCA definition of ‘retail customer’ includes individual customers and small to medium-sized (SME) commercial customers. Within insurance, the Duty applies to all insurance contracts sold to UK customers which are not “contracts of large risk”.
Given the business Markel writes, this means that for many products, whether the Duty applies is determined by the size of the purchasing customer. On that basis, we are applying Consumer Duty to all products and services where the end customer is a UK based individual or SME commercial customer. This will include all of our UK based National Markets business and Wholesale products distributed to UK based customers falling within the customer category types 1-4, including those where Markel does not hold the direct relationship with the end customer.
Why is Consumer Duty important to Markel?
Consumer Duty is aligned to Markel’s philosophy of always putting the customer at the heart of what we do, and ensuring we provide good value to our customers.
The Duty provides an opportunity for us to consider how we deliver products and services that provide the value we always strive for, and complements our existing customer-oriented culture and the Markel Style.
Anne Whittaker – Non-Executive Director – has been appointed as our Consumer Duty Champion at Board level. She will be responsible for leading the Board’s challenge of Markel’s customer impacting operations. This entails challenging both the way the business operates and the strategic decisions it takes, to ensure they are aligned to our stated Good Outcomes
From our Chief Executive Officer, Simon Wilson:
"Delivering high value products to our customers, both in the UK and overseas, has always been ingrained in our principles, and core to our business strategy. We have welcomed the opportunity to ensure we continue to operate in a way which delivers our strategic objectives and delivers value for our customers, the businesses we work with and the wider market."
How has Markel defined its Good Outcomes?
What are Good Outcomes?
The regulator has made it clear to the industry that it expects businesses to consider what Good Outcomes would be for their customers and to ensure they are able to actively measure and track whether those Outcomes are being delivered. The nature of these Outcomes will vary between businesses, but building on our existing Markel principles, and having considered the regulator’s focus for the market, we have agreed five key outcomes that are core to our offering and can be measured across the different parts of our UK business.
Underlying our agreed outcomes, we have identified a suite of key activities that we perform day to day that we can tangibly action throughout our product lifecycles, whether that be in product design, the engagement we have with third parties, or our direct customer interactions. We will continue to keep the activities we have focussed on under review, but are confident that if we continue to do the right things, in the right way, we will deliver the Good Outcomes we are aiming for.
What are the Outcomes we will be looking to assess?
Offering high value products that meet our customers’ expectations has always been core to the way in which we operate. We have therefore planned to monitor the following Good Outcomes:
- Customers receive products that are fairly priced and provide fair value;
- Customers receive products that meet their needs and objectives;
- Customers receive communications about their products which are accessible, clear and available at the right time;
- Customers receive high levels of service, regardless of the channel or mechanism they use to engage with us; and
- Customers are not exposed to foreseeable harm
How will these be overseen?
We are reviewing how we currently report, and what information is available across the business to ensure we can map our activities to our desired outcomes.
What has Markel done to Implement Consumer Duty?
We have invested in a programme of work to understand the impact of the regulatory expectations of Consumer Duty and what this means for our business. The programme of work is wide ranging and has been designed to consider all aspects of the delivery of our products and services, from product and service design, management of distribution and to the journey our customers' experience with Markel when engaging with us.
The work we have undertaken has been designed to identify improvements we can make to consistently deliver Good Outcomes to customers across our business. As we approach the implementation deadline our focus turns to embedding the identified improvements and creating a reporting framework that will enable us to regularly monitor the achievement of Good Outcomes for our customers.
What is Markel doing to comply with the Consumer Duty outcomes?
Products and services:
We consider what cover our products provide and which target markets they are aimed at. This includes reviewing if there are features or limitations that would mean the product is unsuitable for certain customer groups. Outputs of our product assessments are provided within our Distributor Product Guides.
Price and value:
Fair value assessments are undertaken and consider the nature of the product and its cover, other benefits and any limitations, ultimately determining whether the price paid by the end customer for the cover and services we provide is fair. We take a wide range of factors into consideration including historical and expected claims frequencies, incurred and projected claims costs, scenario analysis including likely economic and climatic trends, costs in the distribution chain and customer feedback. Output of our fair value assessments is provided within our Distributor Product Guides.
If any of our fair value assessments results in an outcome where we believe fair value is not being produced, we will take appropriate action to address these concerns. This may mean withdrawing a product from the market until such concerns can be addressed.
The output from our reviews is located here:
Our Product Governance framework includes consideration of the product wording and if this provides clarity of product coverage. There are also processes for the assessment and approval of financial promotions to ensure that these communications are clear, fair and not misleading for the intended audience.
Within the Consumer Duty programme we are reviewing our customer communications to ensure these are accessible, clear and provided at the right time to enable the customer to make effective choices to pursue their financial objectives. Where our review indicates the potential to improve, we will take action to update our communications to support the delivery of Good Outcomes for our customers.
As part of the Consumer Duty programme we have reviewed and documented the journeys our customers experience with Markel when engaging with our products and services. Our work on customer journeys has enabled us to identify key customer touchpoints and consider how we support our customers at these points, including where support is provided through an intermediary or third party.
Where we identify areas for improvement we will work through actions to ensure that appropriate levels of support are provided to our customers and third parties across our products and services. Appropriateness will be informed by the characteristics of the end customer, the nature and complexity of the product and the role Markel operates within the distribution chain.
“Markel’s Board has always prioritised building a long-term sustainable business which puts customers at the heart of its decisions. We are confident that the steps we have taken, and will continue to take, to increase visibility over our processes and the Outcomes we are delivering for our customers – will enable us to better ensure we are truly living the values and principles we pride ourselves on.” - Anne Whitaker, Consumer Duty Champion
We will continue to regularly monitor the customer support provided, including consideration of customer feedback and complaints. We will also ensure that where an intermediary / third party operates on our behalf our expected standards of service and support are clearly communicated and appropriately monitored.
How does Consumer Duty impact how Markel interacts with third parties?
As part of the programme of work we have undertaken to assess the impact of the regulatory expectations of Consumer Duty and what this means for our business, we have reviewed the following areas which may have potential impacts on our third parties:
- Data and management information requirements to evidence delivery of Good Outcomes
- Standard contracts for different distribution and third party relationships
- Customer journeys across our products and services
- Customer vulnerability policy
Data and management information requirements to evidence delivery of Good Outcomes:
To ensure we can monitor our Good Outcomes consistently, we are setting out the minimum Consumer Duty information expectations with our third parties. The data and MI will be used to support us in fulfilling our obligations as manufacturer and demonstrating that Good Outcomes are being achieved in the delivery of our products and services.
Data and management information already provided to Markel remains vital and should still be provided regularly as normal.
Acknowledging that some information is already provided, we will typically be expecting greater granularity across the following areas:
- New product/renewal metrics
- Target market analysis
- Commission rates
- Vulnerable customer numbers and requirements
- Claims (including denials)
- Complaints root cause analysis
- Outcomes and oversight of quality assurance processes
Standard contracts for different distribution and third party relationships:
We have conducted a review of the standard contracts that we have in place across different third party relationships. The purpose of this review was to understand if there were any limitations on the ability to share the data required to fulfil expectations under Consumer Duty. To date we have not identified any such limitations and therefore do not envisage the need for contractual changes at this time to account for the Duty.
Customer Journey Reviews:
As part of the Consumer Duty programme we have reviewed and documented the journeys our customers experience with Markel when engaging with our products and services. Our work on customer journeys has enabled us to identify key customer touchpoints and consider the presence of potential friction points within the customer journey that could impact the delivery of good customer outcomes. To date we have not identified any significant friction points that would suggest customers are receiving poor outcomes, however we have identified areas of improvement where we could better support our customers or provide greater consistency between product servicing.
“We have always been committed to offering services to the market and our clients which combine excellent value with high levels of service. Consumer Duty has offered us the opportunity to provide better evidence that we are meeting these commitments each and every day.” - Nick Line, Chief Underwriting Officer
We are currently working through the identified improvements and will communicate further on progress with these during the implementation period where we believe there will be an impact on our third parties.
We have reviewed our approach to the identification and handling of customer vulnerability characteristics and are in the process of revising our approach to ensure a greater degree of coverage across our products and services. We are currently working through the identified improvements and will communicate further on progress with these during the implementation period where we believe there will be an impact on our third parties.
What are our expectations of the third parties we work with?
It is our expectation that any party involved in the development, distribution and servicing of Markel products and services will adhere to the FCA Consumer Principle, rules and outcomes.
We will provide our third parties with suitable information about our products and services to enable partners to fulfil their responsibilities under the Duty. We will also request data from our third parties to ensure that we can monitor the achievement of Good Outcomes across the customer journey.
The information we provide and request will be proportional based on the role each party is fulfilling in the distribution chain and level of influence they have over the delivery of customer outcomes.
When engaging with third parties we will always have a written agreement that sets out the roles and responsibilities of each party. Responsibilities are apportioned based on the role both parties play in the production, distribution and servicing of products.
Where firms act as a co-manufacturer:
Where third parties act as a co-manufacturer on products and services our expectation is that these firms will undertake activities to ensure the overall product being offered meets regulatory expectations. Depending on the nature of our agreement, this may will include co-manufacturers undertaking some or all of the activities outlined below, and providing Markel with appropriate confidence these are done robustly:
- Undertaking product governance assessments
- Clearly defining of target markets
- Ensuring the design of products and services meets the needs, characteristics and objectives of the defined target market, including consideration of customers with vulnerability characteristic
- Ensuring the product is distributed to the Target Market
- Undertaking fair value assessments
- Providing information to distribution partners that enables partners to fulfil their responsibilities under the Duty, including the defined target market and outcome of fair value assessments
- Monitoring products and services against the delivery of good customer outcomes
- Notifying co-manufacturers and distributors where there are identified problems with an existing product or service and work collaboratively to take action to mitigate any potential harm
In cases where Markel operates as a follow, providing capacity for the market, we will continue to meet the expectation of manufacturers under the Duty proportionally based on the role that Markel is playing in the design of the product.
Where firms act as a distributor:
Where third parties act as a distributor on products and services our expectation is that these firms will undertake the following activities expected of distributors under the Duty:
- Obtain appropriate information to understand the products and services they distribute
- Develop a distribution strategy appropriate for the target market
- Provide appropriate information on product distribution and servicing to enable us to fulfil our responsibilities in the monitoring of the delivery of good outcomes
- Monitor products and services against the delivery of good customer outcomes
- Notify us where there are identified problems with an existing product or service and work collaboratively to take action to mitigate any potential harm
Where firms provide claims services on a delegated authority basis:
Delivery of claims services is a key feature of all insurance products and a core objective for customers. We therefore place a high level of importance on the delivery of our claims services to ensure that these are handled with the due skill, care and timeliness expected by our customers and our brand. We therefore expect all third parties acting on our behalf in the delivery of claims services to uphold our claims standards and adhere to the FCA Consumer Principle, rules and outcomes in the delivery of services.
Where firms are authorised to handle complaints:
We expect all third parties acting on our behalf when handling complaints from customers to adhere to the FCA complaints handling requirements and the FCA Consumer Principle, rules and outcomes.
Contact our team today.