The decision to phase Consumer Duty implementation in this way has come under scrutiny, particularly given some of the more material instances of customer detriment are likely to arise from products sold some time ago and are no longer open to new business – and those firms with entire business units comprising legacy back books of off-sale products will be under particular scrutiny and pressure. How, then, to expedite remediation to ensure prompt and robust compliance in time for the 2024 back book deadline?
Take the time to review Day 1 measures
Over the last 18 months, firms have spent a considerable amount of money, time and energy to assess, review and. where appropriate, remediate for their on-sale products. There will undoubtedly be some scope for those methodologies to be ‘lifted and shifted’ or else lightly adopted for off-sale products falling within scope of the Duty. At the same time, firms should take time to review and consider what went well – and what did not – before simply ‘rinsing and repeating’ for their back book of off-sale products.
Most firms found their review on-sale products against the new requirements exposed several gaps in process and available management information (MI) and data. For example, when completing Fair Value Assessments, most firms identified limitations in their MI relating to cost-allocation, margin, cohort profitability and non-financial costs to the customer. This meant that it was difficult to arrive at a conclusive analysis in all cases. Before undertaking the same assessments for closed products, consider whether the assessment is fit for purpose and whether all the information needed to fulfil the assessments will be available.
Define a new triage methodology
For their off-sale review, as with on-sale products, firms should predetermine a triage methodology, with agreed thresholds to trigger remediation. The off-sale product methodology should include options beyond just amending product characteristics, including product migration or simplification and, if necessary and practical, selling the product to another firm in the longer term.
Organisations should invest time upfront with their Senior Managers to determine how legacy products align with the longer-term business strategy. For example, where there are ongoing initiatives related to product simplification and rationalisation, firms should consider which off-sale products may already be candidates for customers to be migrated onto a more suitable on-sale product. By simply removing such products from the equation, this up-front approach will avoid the need for a more protracted and resource-intensive review and remediation process.
Refine scope and prioritise based on risk
Many firms relied on the categorisation of products within their existing Product Inventory before commencing their review of on-sale products. The FCA has defined off-sale products as those that are “no longer marketed or distributed to retail customers nor open to renewal”. Careful categorisation will be needed to ensure products such as those ‘temporarily off-sale’ have not fallen through the cracks between the on-sale and back book reviews.
Firms should also consider how best to categorise communications templates and journeys that are shared between on-sale and off-sale products. The back book review presents an opportunity to further investigate shared journeys that were deprioritised in Day 1 preparations. As with on-sale products, prioritisation and sequencing should be informed by the degree of risk of customer harm – particularly where there is contagion arising from identified Day 1 harms and/or issues that are known to regularly trigger breaches or complaints.