Consumer Duty
The objective
The Consumer Duty aims to set higher and clearer standards of consumer protection across financial services and requires firms to act to deliver good outcomes for customers.
The key elements
The Consumer Duty is made up of a consumer principle, 3 cross-cutting rules, and 4 outcomes.
The consumer principle
A firm must act to deliver good outcomes for retail customers
Cross-cutting rules
Firms must:
- Act in good faith towards retail customers
- Avoid foreseeable harm to retail customers
- Enable and support retail customers to pursue their financial objectives
Four outcomes
- Product and services
- Price and value
- Consumer understanding
- Consumer support
Meeting our obligations
Delivering the best possible outcomes for our customers has always been our objective. Adhering to the Consumer Duty framework will enable us to continuously measure our actions and make improvements to consistently meet this objective.
We have conducted a gap analysis across the outcomes and cross cutting rules and have implemented key action points to make sure our ongoing processes and documentation are fully compliant.
The FCA has set clear expectations that we monitor, understand, and evidence the outcomes that customers are receiving. These outcomes will be regularly reviewed by senior management to make sure the highest standards are consistently met.
OUR LATEST RESEARCH ON THE IMPACT OF CONSUMER DUTY ON ADVISER BUSINESSES
We ran a survey with nearly 800 advisers for their insight into how the Consumer Duty is impacting their businesses and protection recommendations. The majority of the advisers were positive about the Duty and the protection recommendations would be more value-led.
Expect to make more protection recommendations as the result of the regulation.
Expect Consumer Duty to improve consumer experience of protection.
Said that Consumer Duty will result in more advisers focusing on quality over price when selling protection.
Source: Guardian research with 796 advisers between 11 June and 7 July 2023.
Fair value assessment outcomes
In line with regulatory requirements, we’ve completed our quarterly value for money assessments for all our open products, and the outcome is as follows:
Life Protection
Pass
Life Essentials
Pass
Critical Illness Protection
Pass
Combined Life and Critical Illness Protection
Pass
Income Protection
Pass
Children’s Critical Illness Protection
Pass
Target market statements
It’s important you understand the target market for each of the covers we sell. Below gives you detail of who the cover is suitable and not suitable for.
Life Protection purpose:
This product is designed for people with dependants who would suffer financially if:
- They died.
- They were diagnosed with a terminal Illness.
- They were diagnosed with incurable cancer (stage 4), motor neurone disease, Parkinson-plus syndromes or Creutzfeldt-Jakob disease.
It’s particularly useful for those with a financial commitment like a mortgage or loan, where their dependants would still be liable for the debt if they died.
Life Protection is suitable for:
- People who want a lump sum if they die, are diagnosed with a terminal illness or are diagnosed with incurable cancer (stage 4), motor neurone disease (with permanent clinical impairment), Parkinson-plus syndromes (with permanent clinical impairment) or Creutzfeldt-Jakob disease during the term of their policy.
- People who want certainty that their premiums are guaranteed not to change (unless they’ve chosen Increasing Cover).
- People who are not willing or able to self-insure, or who don’t have funds elsewhere.
- People who need cover between their 18th and 90th birthdays (inclusive).
- People who need cover for at least 1 year and up to 72 years.
Level Cover is suitable for:
- People looking to protect an interest-only mortgage with cover that pays out the same lump sum throughout the life of the policy.
- People looking for certainty that their amount of cover is fixed for the life of the policy.
Decreasing Cover is suitable for:
- People looking to cover the reducing amount they owe on a capital and interest repayment mortgage or other loans.
- People looking for a lump sum that reduces in line with the debt they owe on a mortgage or loan.
Increasing Cover is suitable for:
- People looking for the amount of cover to go up each year in line with the retail price index (RPI) to keep up with inflation.
Family Income Benefit is suitable for:
- People looking for a policy that provides a monthly income, helping to give financial support to cover the cost of everyday living expenses.
Life Protection is NOT suitable for:
- People looking for a product to pay a regular income if they’re unable to work for a period of time as a result of an accident or sickness.
- People looking for a product to pay a lump sum if they’re diagnosed with a critical illness.
- People looking for business protection to cover the loss of a key person.
- People looking to provide finance to purchase shares of a director or partner in the event of their death.
- People looking to cover an interest-only business loan.
- People who want their premiums to be reviewable.
- People who don’t have any financial dependents.
- People who are looking to protect themselves.
Level Cover is NOT suitable for:
- Covering any rising costs to keep up with inflation as the amount of cover will be worth less in the future.
Decreasing Cover is NOT suitable for:
- Covering the debt on an interest-only mortgage as the amount of cover will go down and the mortgage debt will stay the same, so the debt could be greater than the amount of cover in place.
Increasing Cover is NOT suitable for:
- Covering a mortgage debt, as the amount of cover will go up and the mortgage debt will go down or stay the same, this could result in people paying for extra cover they don’t need.
Family Income Benefit is NOT suitable for:
- Covering a mortgage or other debts.
- Cover that provides a lump sum is more appropriate for that.
Life Essentials purpose:
This product is designed for people with dependants who would suffer financially if:
- They died.
- They were diagnosed with a terminal Illness and have less than 12 months to live.
It’s particularly useful for those with a financial commitment like a mortgage or loan, where their dependants would still be liable for the debt if they died.
Life Essentials is suitable for:
- People who want a lump sum if they die or are diagnosed with a terminal illness and have less than 12 months to live.
- People who want certainty that their premiums are guaranteed not to change (unless they’ve chosen Increasing Cover).
- People who aren’t willing or able to self-insure, or who don’t have funds elsewhere.
- People who need cover between their 18th and 90th birthdays (inclusive).
- People who need cover for at least 1 year and up to 72 years.
Level Cover is suitable for:
- People looking to protect an interest-only mortgage with cover that pays out the same lump sum throughout the life of the policy.
- People looking for certainty that their amount of cover is fixed for the life of the policy.
Decreasing Cover is suitable for:
- People looking to cover the reducing amount they owe on a capital and interest repayment mortgage or other loans.
- People looking for a lump sum that reduces every month by 8% in line with the debt they owe on a mortgage loan.
Increasing Cover is suitable for:
- People looking for the amount of cover to go up each year in line with the consumer price index including owner occupiers’ housing cost (CPIH) to keep up with inflation.
Life Protection is NOT suitable for:
- People looking for a product to pay a regular income if they’re unable to work for a period of time as a result of an accident or sickness.
- People looking for a product to pay a lump sum if they’re diagnosed with a critical illness.
- People or business protection to cover the loss of a key person.
- People looking to provide finance to purchase shares of a director or partner in the event of their death.
- People looking to cover an interest-only business loan.
- People who want their premiums to be reviewable.
- People who don’t have any financial dependents.
- People who are looking to protect themselves for the rest of their life.
Level Cover is NOT suitable for:
- Covering any rising costs to keep up with inflation as the amount of cover will be worth less in the future.
Decreasing Cover is NOT suitable for:
- Covering the debt on an interest-only mortgage as the amount of cover will go down and the mortgage debt will stay the same, so the debt could be greater than the amount of cover in place.
- Customers who want to guarantee that their outstanding mortgage amount will be covered at time of claim.
Increasing Cover is NOT suitable for:
- Covering a mortgage debt, as the amount of cover will go up and the mortgage debt will go down or stay the same, so this could result in people paying for extra cover they don’t need.
Critical Illness Protection purpose:
This product is designed for people who would suffer financially if:
- They survived for 14 days after being diagnosed with one of the critical illnesses listed in the policy terms and conditions.
- They were diagnosed with a terminal Illness and were expected to have less than 12 months to live.
It’s particularly useful for people who want to protect themselves or their families against the financial cost of suffering a critical illness. It can help them pay off financial commitments like a mortgage or loan, where their dependants would still be liable for the debt. Or it could pay for treatment or specialist equipment to help them recover and compensate for any loss of income resulting from the illness.
Critical Illness Protection is suitable for:
- People who want a lump sum if they’re diagnosed with a specified critical illness during the term of their policy.
- People who want a lump sum if they’re diagnosed with a terminal illness during the term of their policy and are expected to have less than 12 months to live.
- People who want certainty that their premiums are guaranteed not to change (unless they’ve chosen Increasing Cover).
- People who are not willing or able to self-insure, or don’t have funds elsewhere.
- People who need cover between their 18th and 70th birthdays (inclusive).
- People who need cover for at least 5 years and up to 52 years.
Level Cover is suitable for:
- People looking to protect an interest-only mortgage with cover that pays out the same lump sum throughout the life of the policy.
- People looking for certainty that their amount of cover is fixed for the term of the policy.
Decreasing Cover is suitable for:
- People looking to cover the reducing amount they owe on a capital and interest repayment mortgage or other loans.
- People looking for a lump sum that reduces in line with the debt they owe on a mortgage or loan.
Increasing Cover is suitable for:
- People looking for the amount of cover to go up each year in line with the retail price index (RPI) to keep up with inflation.
Family Income Benefit is suitable for:
- People looking for a policy that provides a monthly income, helping to give financial support to cover the cost of everyday living expenses.
Critical Illness Protection is NOT suitable for:
- People looking for a product to pay a regular income if they’re unable to work for a period of time as a result of an accident or sickness.
- People looking for a product to pay a lump sum in the event of their death.
- People looking for business protection to cover the loss of a key person.
- People looking to provide finance to purchase shares of a director or partner in the event of their death.
- People looking to cover an interest-only business loan.
- People who want their premiums to be reviewable.
- People who are looking to protect themselves for the rest of their life.
Level Cover is NOT suitable for:
- Covering any rising costs to keep up with inflation as the amount of cover will be worth less in the future.
Decreasing Cover is NOT suitable for:
- Covering the debt on an interest-only mortgage as the amount of cover will go down and the mortgage debt will stay the same, so the debt could be greater than the amount of cover in place.
Increasing Cover is NOT suitable for:
- Covering a mortgage debt, as the amount of cover will go up and the mortgage debt will go down or stay the same, so this could result in people paying for extra cover they don’t need.
Family Income Benefit is NOT suitable for:
- Covering a mortgage or other debts. Cover that provides a lump sum is more appropriate for that.
Combined Life and Critical Illness Protection purpose:
This product is designed for people, or their dependants who would suffer financially if:
- They are diagnosed with one of the critical illnesses listed in the policy terms and conditions.
- They died.
- They were diagnosed with a terminal Illness and were expected to have less than 12 months to live.
It’s particularly useful for people who want to protect themselves or their families against the financial cost of suffering a critical illness. It can help them pay off financial commitments like a mortgage or loan, where their dependants would still be liable for the debt. Or it could pay for treatment or specialist equipment to help them recover and compensate for any loss of income resulting from the illness.
Combined Life and Critical Illness Protection is suitable for:
- People who want a lump sum on the earlier of their death or diagnosis of a specified critical illness during the term of their policy.
- People who want a lump sum if they’re diagnosed with a terminal illness during the term of their policy and are expected to have less than 12 months to live.
- People who want certainty that their premiums are guaranteed not to change (unless they’ve chosen Increasing Cover).
- People who are not willing or able to self-insure, or don’t have funds elsewhere.
- People who need cover between their 18th and 70th birthdays (inclusive).
- People who need cover for at least 5 years and up to 52 years.
Level Cover is suitable for:
- People looking to protect an interest interest-only mortgage with cover that pays out the same lump sum throughout the life of the policy.
- People looking for certainty that their amount of cover is fixed for the life of the policy.
Decreasing Cover is suitable for:
- People looking to cover the reducing amount they owe on a capital and interest repayment mortgage or other loans.
- People looking for a lump sum that reduces in line with the debt they owe on a mortgage or loan.
Increasing Cover is suitable for:
- People looking for the amount of cover to go up each year in line with the retail price index (RPI) to keep up with inflation.
Combined Life and Critical Illness Protection is NOT suitable for:
- People looking for a product to pay a regular income if they’re unable to work for a period of time as a result of an accident or sickness.
- People looking for business protection to cover the loss of a key person.
- People looking to provide finance to purchase shares of a director or partner in the event of their death.
- People looking to cover an interest-only business loan.
- People who want their premiums to be reviewable.
- People who are looking to protect themselves for the rest of their life.
Level Cover is NOT suitable for:
- Covering any rising costs to keep up with inflation as the amount of cover will be worth less in the future.
Decreasing Cover is NOT suitable for:
- Covering the debt on an interest-only mortgage as the amount of cover will go down and the mortgage debt will stay the same, so the debt could be greater than the amount of cover in place.
Increasing Cover is NOT suitable for:
- Covering a mortgage debt, as the amount of cover will go up and the mortgage debt will go down or stay the same, so this could result in people paying for extra cover they don’t need.
Income Protection purpose:
This product is designed for people who:
- Have regular earnings who want to insure themselves against loss of income because of illness or injury.
- Have financial commitments and outstanding debts which may include rent or mortgage payments.
- Are aged between 18 and 59 years old.
Income Protection is suitable for:
- People who want certainty that their premiums are guaranteed not to change (unless they’ve chosen Increasing Cover).
- People who are not willing or able to self-insure, or don’t have funds elsewhere.
- People who need cover between their 18th and 70th birthdays (inclusive).
- People who need cover for at least 5 years and up to 52 years.
Level Cover is suitable for:
- People whose Income Protection needs are unlikely to change. However, the amount of cover can be amended if required, for example to accommodate changes in salary.
Increasing Cover is suitable for:
- People looking for the amount of cover to go up each year in line with inflation based on the consumer prices index including owner occupiers’ housing costs (CPIH, up to a maximum of 10%). For example, a person who expects their income to increase over time and wants their Income Protection to increase as well.
Income Protection is NOT suitable for:
- People who have enough group income protection through their employer.
- People who are not currently earning an income by working at least 16 hours a week.
- People who would be eligible for material state benefits if they were unable to work.
- People who are currently off work due to illness or injury and who wouldn’t be able to claim in the future.
- People looking for business protection or key person cover.
- People who want their premiums to be reviewable.
- People who are looking to protect themselves for the rest of their lives.
Level Cover is NOT suitable for:
- People who want their Income Protection amount to keep up with inflation.
Increasing Cover is NOT suitable for:
- People who only need a fixed Income Protection amount throughout the term of the cover.
Full term payment period is not suitable for:
- People who would only need the payment to be made for a maximum of 2 years. .
2-year payment period is NOT suitable for:
- People who would need the payment to be made for longer than 2 years for a single claim.
VULNERABLE CUSTOMERS
Protecting vulnerable customers and treating them fairly are key to the Consumer Duty. Under the Duty, you should make every effort to tune into, understand, and be sensitive to your customers’ experiences and feelings. While your experiences may not mirror those of your customers, it’s likely you’ve been in a vulnerable position before, too. Remembering that experience can help you approach a customer in a more empathetic way.
Where you identify a vulnerable characteristic as defined by the FCA, it may mean categorising the person as a vulnerable customer, please let us know. Just email us at advisers@guardian1821.co.uk or call us on 0808 133 1821, so we can consider what enhanced support they might need and update our records accordingly.
FREQUENTLY ASKED QUESTIONS
The statement outlines the target market for our products and the way they should be sold. You need to regularly check that the products align with customers in the target market.
Firstly, you’ll need to investigate whether this has resulted in any harm. If so, please take action to lessen any harm that might have been caused. Afterwards, please also let us know any instances where this has happened and how you’re going to resolve it. Finally, you’ll need to update your distribution strategies and make sure they align with the target market.
No, but please make sure that the product still offers a fair value after you add the charges for distributing products or services. All firms in the distribution chain are responsible for carrying out their own value assessments.
We review our products quarterly. Our product reviews will also include the assessment of fair value and whether the distribution aligns with the target market.
It varies depending on the product. You can find full details in the fair value assessment document, which can be downloaded here.
We’ll contact you directly if we need anything specific and continue to review and monitor the data we maintain across our different products.
We need to make sure the information presented can be understood by our customers and enable them to make informed decisions at the right time about our product and services.
We’re working with an external party to test key communications and will be making any changes as we review our communications.
We’ll incorporate the consumer duty principle into all communication reviews going forward and into any communications for our new customers.
Yes, we have identified 3 main areas where foreseeable harm to customers can be caused from our products:
- We could give false comfort to the customer about the extent of the cover provided if our documentation isn’t clear. Ambiguity could lead to a misunderstanding that only becomes apparent at the time of claim.
- If affordability isn’t considered, the customer could come under financial strain because the premium is too high for them.
- The customer may not take out enough cover to meet their needs, they may take out more cover than they need, or they may fail to reduce their cover appropriately if and when their circumstances change.
USEFUL LINKS
The FCA is committed to supporting the success of the Consumer Duty.
Below are links to a range of helpful FCA information.
- FCA Consumer Duty policy statement
- FCA Consumer Duty final guidance
- FCA Consumer Duty webinar
- FCA Consumer Duty email updates
- FCA Consumer Duty homepage
Insight about the Consumer Duty
Supporting our partners to meet the Consumer Duty
Vincent O’Connor
Head of Strategic Partnerships
