Around 92% of insurance companies are not yet fully compliant with the upcoming Consumer Duty rules, research by platform Moneyhub found.
The firm discovered that insurers seem to be the least prepared compared to other sectors within financial services.
In fact, currently, just 8% are fully compliant for the regulation ahead of its July 2023 deadline.
Around 43% of insurance companies said they would not have been able to fully adhere to the rules by the original deadline of April 2023, and a further 43% are yet to develop plans despite the FCA requiring firms to have them approved by October 2022.
In comparison, across the industry, the proportion of firms that are still behind on their plans is 28%, the platform found.
Samantha Seaton, chief executive of Moneyhub, said: “It’s disappointing that these new regulations are needed. It highlights that many financial services products have failed, and continue to fail, customers. We now have the opportunity to course-correct, not only for the benefit of the customer but for our businesses too.
“It has to be acknowledged that this isn’t a simple task. Consumer Duty means a complete overhaul of the way businesses interact with their customers. Not only must insurers evidence that their products are distributed to customers for whom they were designed and intended for at the point of sale, but on top, they also must continue to evidence this throughout the lifespan of a product.
“With many insurance products being long-term commitments, this will be a challenge, requiring the insurer to have a deep understanding of the consumer’s financial situation at every stage of the customer journey.
“I urge businesses to familiarise themselves with the legislation and compliance options. There are growth opportunities to be gained by firms that embrace the Consumer Duty and redesign products, customer journeys and users’ experiences.”
But at a webinar hosted by market insight firm Consumer Intelligence with 200 insurance professionals, 88% claimed they were prepared for the introduction of the Consumer Duty, with 24% saying they were well prepared and just 4% admitted to not being prepared at all.
The company believes the upcoming regulation could be a “golden ticket” for insurers to start doing things differently.
Yet insurance companies still seem to fall short somehow, as they revealed that preparations for the third and fourth outcomes under the regulation – consumer understanding and customer support – are behind due to a lack of external data and insights which are making benchmarking difficult.
Karen Houseago, head of insurance at Consumer Intelligence, said: “Consumer Duty is a golden ticket to look at every stage of the customer journey from the customer perspective. This is an opportunity for change – take it. Rethink your product design, rethink your distribution channels and do things differently.”
Ian Hughes, chief executive of Consumer Intelligence, added: “If you lean into outcomes three and four, if you place the customer at the heart of your business and you look at how you can make things better, this is an enormous opportunity.”