The FCA's expectations of outcomes monitoring under the Consumer Duty

What's this about?

The FCA has published findings of its review of larger insurance firms’ approach to Consumer Duty outcome monitoring. The findings of the review set out what the FCA regards as good and poor practices in relation to outcome monitoring to ensure that a firm is meeting its obligations to deliver good customers outcomes under Consumer Duty. We have summarised below key elements that your outcome monitoring should have to be able to demonstrate you are meeting regulatory obligations under Consumer Duty.

Our Financial Services Regulatory Partner, Ben Cooper says...

“The key message from the FCA is that firms must be able to evidence effective monitoring for delivery of customer outcomes is in place and demonstrate how it is driving improvements in outcomes being received by customer including for vulnerable ones.”

The points not to miss 

Regulatory Expectations

Firms are expected to be able evidence that they regularly assess, test, and understand the outcomes they are delivering for their customers. They should be able to demonstrate they have:

• clearly defined customer outcomes.

• suite of metrics to monitor Consumer Duty outcomes.

• identified poor or potentially poor outcomes.

• investigated poor or potentially poor outcomes, and where needed - what actions have been taken how customer outcomes are evaluated using the targeted suite of metrics.

To meet regulatory expectations of effective outcomes monitoring, the following are key elements that should form part of your monitoring approach:

• Identify Key Outcomes: Determine the specific outcomes you want to achieve for your customers based on your business strategy, products, services, and target markets. Clearly define what good and poor outcomes look like.

• Assess Data Needs: Identify the relevant sources of data that will provide insights into whether you are delivering good outcomes. This could include service level agreements, compliance, product performance data, customer feedback and complaints analysis.

• Comprehensive Suite of Metrics: Create a wide range of metrics and data mapped against the four Consumer Duty outcomes covering all aspects of the customer experience for distinct groups of customer e.g. vulnerable customers. The metrics should also have clearly articulated tolerances in place for all key metrics. The tolerances should be formally reviewed to ensure that they were set at an appropriate level and scrutinised annually.

• Implement Monitoring Systems: Set up coherent and comprehensive systems to regularly collect and analyse the identified metrics.

• Test Customer Outcomes: Develop frameworks to test customer outcomes by understanding customer journeys. Use risk-based approaches to test different customer types (e.g. vulnerable customers) and processes. Link the analysis from testing directly to the four Consumer Duty outcomes.

• Address Data Gaps: Identify any gaps in your data and develop plans to enhance either the data or the monitoring approach. Ensure that you are not relying solely on repackaging existing data without considering gaps or the outcomes it is meant to monitor.
• Integrate Second-Line Scrutiny: Ensure that customer outcomes are a central focus of your risk control arrangements and internal audit function. Integrate second-line scrutiny to challenge the type and granularity of data being used, its interpretation, and the thresholds applied by the First-Line.
• Provide Clear Reporting: Present and explain data clearly to facilitate understanding, scrutiny, and challenge by senior management and boards. Ensure that reporting includes recommendations or potential actions based on the data.

• Actions taken to address poor outcomes: Firms should from a wide range of data be able to evidence that it has:

  • identified poor outcomes or potentially poor outcomes for groups of customers.

  • undertaken a risk-based deeper analysis to identify where customer outcomes could be improved.

  • any actions undertaken to improve customer outcomes or for groups of customers should have its progress and impact actions on customer outcomes tracked.

Some of the poor practices in outcomes monitoring identified by the FCA include:

• relying too much on repackaging existing data without considering gaps or the outcomes it is meant to monitor.

• data that does not facilitate scrutiny or challenge, such as numbers presented with limited narrative or arbitrary thresholds.

• taking assurance that completion of, or lack of material findings from, product reviews or consumer understanding assessments automatically indicated good outcomes were being achieved.

• being over-reliant on one type of data.

• inability to demonstrate how improvements to customer outcomes were being monitored after a change is made in response to identified poor outcomes.

• ·overreliance on process completion rather than outcomes achieved.

• inability for outcome-monitoring data to differentiate by customer group of vulnerable customers.

• data not facing facilitating scrutiny or challenge.

Next steps: Firms are expected to critically assess their outcomes monitoring and how it is driving their delivery of good customers outcomes. The FCA’s expectations is that if firms identify potential gaps in outcomes-monitoring arrangement, they will take action to remedy those issues.

At a glance...

Co-author: Pepi Ivanov 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.