The House of Lords Financial Services Regulation Committee is currently taking evidence on the consumer insurance market, and the question running through it is one I think every board sponsoring a Consumer Duty programme should be asking itself right now: has the Duty actually changed what happens to customers, or has it mainly changed what firms can show a regulator?
The evidence is not encouraging
The evidence so far is not encouraging for anyone hoping the answer is obviously the former. Claims acceptance rates and complaint volumes have moved only a little since the Duty came into force in 2023, despite the governance effort that has gone into it across the industry. Insurers giving evidence to the Committee have, for the most part, defended their record and argued that Consumer Duty already gives the FCA everything it needs to intervene where firms fall short, without new prescriptive rules. That is a reasonable position to take in front of a parliamentary committee. It is also, on its own, not much of an answer to the question the Committee is actually asking.
A meaningful shift in tone from the FCA
What has caught my attention is the FCA's own reported position: that it is prepared to introduce specific, prescriptive rules — defining a term like "wear and tear," for instance — if the industry cannot demonstrate that consumer understanding has genuinely improved at the point where it matters most, which is the point of claim. That is a meaningful shift in tone. Consumer Duty was sold to the industry, correctly in my view, as a principles-based alternative to prescriptive rulemaking: firms get to decide how to deliver good outcomes, rather than being told exactly what to do. The moment a regulator starts talking about defining specific terms in specific ways, that bargain is under strain. And it is under strain for a reason that boards should find uncomfortable: not because firms haven't built the governance, but because the governance hasn't yet been shown to change the outcome.
Where Consumer Duty reporting still falls short
This is where I think most Consumer Duty reporting still falls short, three years in. Claims acceptance rate is an easy number to produce and an easy number for a board to nod along to, but it tells you almost nothing about whether a customer's expectations at the point of sale matched what actually happened at the point of claim. It doesn't tell you whether the customer who had part of a claim declined for "wear and tear" understood that risk when they took out the policy, or whether they understood it only when the claim was refused. It doesn't tell you whether the same confusion is showing up again and again across claims and complaints in a pattern that ought to be obvious to anyone actually looking. A single acceptance-rate metric can sit at a perfectly respectable level while that pattern goes completely unaddressed.
Firms that can point only to the governance work, and not to a genuine, demonstrable shift in customer outcomes, are going to find that a much harder position to defend in eighteen months' time than it is today.
What boards should actually be asking for
What I'd want to see from any board I sit on is a Consumer Duty report that goes beyond acceptance rates into the metrics the Committee itself is now pointing to: settlement times, the prevalence of partial payments and the reasons behind them, complaint themes tracked over time rather than as a single snapshot, and how the firm's own outcomes compare with what the Financial Ombudsman Service is actually deciding when those complaints escalate. None of that is complicated to produce. It is, I suspect, simply not yet routine, because the easier metrics have been treated as sufficient for long enough that nobody has had to ask for more.
The Lords inquiry hasn't concluded, and I wouldn't want to pre-empt where it lands. But the direction of travel is clear enough already. Firms that can point only to the governance work, and not to a genuine, demonstrable shift in customer outcomes, are going to find that a much harder position to defend in eighteen months' time than it is today. Better to close that gap now, on our own terms, than to have it defined for us by a rule about wear and tear.