Yesterday the Central Bank of Ireland (CBI) published its Consumer Protection Outlook for 2020, the first since 2017. This sets out the consumer protection priorities for the coming year and sets out a number of ways in which it expects to supervise financial services firms.
The report confirms that protecting consumers is at the heart of the CBI’s work and acknowledges that there is work to be done to restore consumer trust in financial services. The CBI operates a ‘risk based’ supervisory approach – regulatory scrutiny and focus is prioritised according to the level of risk the firms and products pose to consumers.
The CBI understands that the Rulebook must adapt to changing times. One way in which the Regulator gathers consumer feedback about firms is to monitor social medial channels. The CBI will use social media not just to ascertain consumer satisfaction with the service they receive, but also to identify where possible failures in operational resilience may occur, for example if there is a spike in the number of tweets complaining of inability to access online portals or extra-long time to get through on the phone. The report specifically calls out a perception that new customers get preferential treatment when compared to deals available to existing customers as a repeated issue picked up through the social media monitoring.
In our recent meetings with the CBI the relevant teams outlined their consumer protection priorities for 2020, which are re-iterated in the report. The top two priorities relate to the strengthening of the consumer protection framework (including the review of the Consumer Protection Code) and driving firms to embed effective consumer-focussed culture (including a review of price differentiation in the Home and Motor insurance market). As well as themed inspections, the CBI will be undertaking a considerable review and redrafting of the Consumer Protection Code, we expect to see the outline reviewed code towards the back end of 2020. Interacting with the teams undertaking this review will be a pivotal work stream for me and my colleagues in Insurance Ireland over the coming months.
The report was very clear that the supervisory focus for the CBI in 2020 is on driving Boards and Senior Management of FS firms to embed an effective consumer-focussed culture for the firms that they lead. There was a clear message that although the initial Culture work and thematic review focused on the Banking industry, all sectors across financial services are expected to understand the findings of the review and assess how their firm demonstrates that the customer is at the heart of everything they do. This includes a responsibility on senior leadership teams and Boards to drive a customer focussed culture. We will see more on cultural expectations from the CBI in the Diversity and Inclusion in Insurance report due to be published in early April, as diversity in leadership is seen as essential in driving an effective firm culture. While most firms have a clear customer focussed attitude, it can be difficult to understand the CBI’s expectations in this area in terms of demonstrating this sufficiently and so Insurance Ireland, on behalf of our members, will seek more detail in terms of the Culture Assessment Framework and good/poor practice examples from the CBI over the coming months to support firms in meeting and exceeding expectations in this area.
Perceived ineffective disclosure and a lack of governance and oversight of outsourcing arrangements were also flagged as significant consumer risks and a priority for the Regulator this year. Consequently the CBI signal that a number of targeted Consumer Protection and Risk Assessments on product oversight and governance in banks (this is likely to include bancassurance) will be carried out. Insurance Ireland has seen the increase in activity in recent months in both of these areas and will continue to work with the regulator to seek pragmatic ways to mitigate these risks while improving products and services available to consumers.
As expected, an increased focus on price differences in insurance will be a supervisory focus in 2020. The review will seek to establish the impact of differential pricing on consumers while at the same time establishing the drivers of consumer behaviours, including how consumers engage with the insurance industry. In examining this issue, the CBI will be mindful of work conducted by EIOPA and the FCA in the UK.
Another thematic review will look at Black Box technology (telematics) over the coming year and what controls and oversight is in place, particularly where the collection of the data is outsourced.
The CBI acknowledged that the rapid increase in technological innovation has fundamentally changed how consumers interact with FS firms. A priority for the CBI as flagged in the report, is the mitigation of cyber risk, appropriate operational resilience and robust internal controls, all of which are essential in providing these innovative services to consumers. We expect to see a number of themed inspections as well as an increase in desk-based reviews of firms in this area. However, we would also expect the CBI to support firms in their development of products and services that can increase customer engagement in their financial health and well-being and will work with the Regulator to ensure that regulation keeps pace with technological developments to allow this innovation in the best interests of the consumer.
It is unsurprising that the risks arising from the UK’s exit from the EU is also noted as a consumer protection priority for 2020. Given that the UK is still in a transition period, the impact of the withdrawal is yet to be fully seen and the CBI expects firms to identify potential risks and implement plans to mitigate in order to ensure minimum disruption to customers.
While the majority of the report focuses on domestic issues, the CBI also operates within the EU and Internationally and acknowledged that the introduction of EU initiatives into domestic legislation plays an important role in strengthening consumer protection. At the end of 2019 EIOPA published their 8th Consumer Trends Report, which looks the consumer issues that may well come under their supervisory focus in the future.
Insurance Ireland looks forward to working with the CBI in ensuring that the insurance industry has an opportunity to feed into the delivery of these priorities and to understand more about how the Regulator expects insurance firms to demonstrate adherence to these expectations.
If you have any questions or comments on the Consumer Protection Outlook, the review of the Consumer Protection Code or any of the content above please contact Jacqueline Thornton (Jacqueline.firstname.lastname@example.org)