A Global View - Treating Customers Fairly (TCF) within Insurance

As part of our Global Regulatory Outlook for 2025, we identified delivering good outcomes for consumers as a key priority for regulators worldwide. The treatment of customers will continue to feature heavily in the coming year, with policymakers actively implementing changes to elevate standards and address the evolving risk landscape. As innovation and technological advancements reshapes the insurance industry, insurers will need to balance new products with conduct obligations.

The Cultural Shift Towards Fair Treatment

Both globally and locally, the emphasis on the fair treatment of a diverse customer base is becoming ingrained in the corporate culture of insurance firms. The International Association of Insurance Supervisors (IAIS) recently published its final application paper on the fair treatment of a wide range of customers and is garnering attention from regulatory bodies. The IAIS underscores that, serving a wide range of consumers fairly requires an awareness that there may be systemic or idiosyncratic inequities or unfairness inherent in the way the insurance business is conducted, either because of inherent societal inequities, bias, or ignorance, or because of suboptimal business practices, such as inefficient or insufficient execution of policies and/or processes.

Global approaches

The introduction of the Consumer Duty by the UK Financial Conduct Authority’s (FCA) in 2023, has set a new benchmark for consumer protection, establishing a duty of care that financial services firms owe to their retail customers. This initiative has sparked interest among regulators globally, many of whom are bringing forward similar measures. For example, The  Monetary Authority of Singapore has broadened its Guidelines on Fair Dealing, including requirements relating to product design, explanations of products and their terms and conditions, and complaints handling that mirror aspects of the UK Consumer Duty.[1] Japan is also set to implement new product governance rules,[2] while New Zealand’s Conduct of Financial Institutions Regime effective from 31 March 2025 aims to bolster systems ensuring fair treatment of customers.[3] Additionally, several authorities in the Middle East are updating their conduct and consumer protection regimes.  

Across the EU, National Competent Authorities retain the primary responsibility for ensuring fair customer treatment due to current limitations on the European Insurance and Occupational Pension Authority’s (EIOPA) legal instruments and its governance. The European Commission and EIOPA are working to address national disparities within the Single Market. Similarly, the proposed Retail Investment Strategy (RIS) seeks to align the treatment of customers within the EU. The RIS proposal’s key insurance topics under legislative negotiation include value for money, inducements, best interest tests, suitability and appropriateness assessments, and disclosures. Similarly, EU member states are also laying the groundwork domestically. For instance, Ireland updated its Consumer Protection Code this year, adding a dedicated insurance chapter and allowing 12 months for implementation. [4]

Comparing the UK Consumer Duty and IAIS guidance

The IAIS guidance and Consumer Duty share a common vision for the expected outcomes from insurance firms, focusing on the fair treatment of all customers, including those with unique needs. Both frameworks emphasize the importance of ongoing monitoring and review to ensure compliance. However, the Consumer Duty provides a more detailed roadmap for achieving these objectives, highlighting some gaps in individual expectations.

Key differences:

1.      Target Market: Despite confirming firm’s autonomy in deciding the breadth of their business, the IAIS emphasizes inclusivity and accessibility for underserved groups, while the Consumer Duty lacks specific guidelines on target market breadth.

2.      Detail on Fair Value: The IAIS guidance is much less detailed regarding fair value assessments compared to the Consumer Duty, which clearly defines how to evaluate product value for customers.

3.      Monitoring and internal reporting: The Consumer Duty sets more comprehensive expectations for monitoring and reporting, including the role of the Board and internal governance processes, than the IAIS.

4.      Public accountability: The IAIS suggests making certain policies public to enhance accountability, a recommendation not found in the Consumer Duty.

5.      Culture and DEI: The IAIS provides more explicit recommendations for fostering a positive culture and diversity within firms, which is less detailed in the Consumer Duty in this regard.

Strategic Consideration for Insurers/Intermediaries

To navigate this evolving landscape, insurers should consider the following:

·        Establish a Strong Compliance Culture: Cultivate a tone from the top that emphasizes compliance and risk management, supported by a constructive feedback mechanism and targeted training.

·        Customer-Centric Approach: Place customer outcomes at the heart of your strategy. Put yourself in the customers’ shoes and use customers’ insights to inform your products and services.

·        Monitor Feedback: Actively monitor consumer complaints and public comments to track where there may be concerns about outcomes.

·        Proactive Regulatory Compliance: Review your end-to-end user journey to eliminate unfair practices, simplify information, and clarify fee structures.

·        Understand Regulatory Perspectives: familiarize yourself with how regulators interpret the principle of fairness and be prepared to demonstrate how you are delivering in customers’ interests.

·        Manage Partner Impact: Understand your responsibilities in managing the consumer impact created by your partners and affiliates.

·        Combat exposure to Fraud and Scams: Assess how your organization can enhance customer awareness of fraud and scams and consider implementing controls to support customers in protecting themselves.

In conclusion, as the insurance landscape continues to evolve, the commitment to treating customers fairly must remain at the forefront of industry practices. By embracing these insights and strategies, insurers can not only comply with regulatory expectations but also foster trust and loyalty among their diverse customer bases.

Recommended further reading:

ey-gl-global-insurance-outlook-01-2025.pdf

Disclaimer: The views reflected in this article are the author’s views and do not necessarily reflect the views of the global EY organization or its member firms.

[1] https://www.mas.gov.sg/news/media-releases/2024/mas-expands-application-of-fair-dealing-guidelines

[2] 01.pdf Japanese Financial Services Authority (JFA)

[3] Conduct of financial institutions regime | Ministry of Business, Innovation & Employment

[4] https://www.centralbank.ie/regulation/consumer-protection/consumer-protection-code