Consumer duty – why insurers and suppliers need to up their relationship game

The Financial Conduct Authority's Consumer Duty is now well-established as a regulatory framework.

What is less well established is its role as a genuine driver of claims philosophy and strategy across insurers, MGAs, and their supply chains.

That gap is real, and it really matters. Why? Because Consumer Duty does not simply refine existing expectations—it changes the basis on which claims handling is judged. 

The shift from a regulatory approach based on “Did you follow the rules and processes?” to one based on “Did the customer receive a good outcome?” is fundamental. 

The FCA has been clear, firms must be able to “…demonstrate that they are delivering good outcomes for retail customers…”, not simply that they’re operating compliant processes.

Parts of the claims value chain have been slow to respond to this shift. That creates risk—not just of regulatory scrutiny but of failing to meet the standards customers increasingly expect.

What Consumer Duty really means in claims

Consumer Duty places claims firmly at the centre of regulatory accountability. 

It is in the claims journey that the value of the product is ultimately tested, and the FCA has been explicit that fair value must be assessed across the entire customer lifecycle, including at the point of claim.

For a claims industry historically focused on measuring activity, the most important adjustment is understanding the distinction between activity and outcome.

Claims functions have traditionally tracked indicators such as call answering times, backlogs, and service levels. These remain relevant, but they are not what the regulator considers to be outcomes. An activity is what you do; an outcome is what the customer experiences as a result.

It is entirely possible to deliver strong activity metrics and still produce poor outcomes. Calls can be answered quickly, yet handled poorly. Claims can be progressed within SLAs, yet result in settlements that customers don’t understand or can’t act upon.

The outcomes the FCA is concerned with are more fundamental: whether settlements are fair and sufficient, whether customers understand the options available to them, and whether they can, in practice, reinstate their position. 

As the FCA has stated, firms must “…act to deliver good outcomes and avoid causing foreseeable harm…”—a standard that goes well beyond process adherence.

This, in turn, requires a different approach to oversight. Outcomes must be evidenced through robust data, not assumed. And risk management must become more proactive, with firms expected to identify where poor outcomes could arise and act before harm crystallises.

Who owns Consumer Duty—and what that means for supplier relationships

The question of accountability is straightforward in regulatory terms, even if it is uncomfortable in practice.

The insurer is responsible.

The FCA has been unequivocal on this point: firms “…remain responsible for outcomes even when activities are outsourced…”. From a regulatory perspective, there is no distinction between an insurer’s own claims operation and that of its MGA or supply chain.

For insurers that rely heavily on delegated authority or outsourced claims models, this represents a material shift. It requires far greater visibility, control, and assurance than has historically been the case. The idea that elements of the claims journey can sit outside direct oversight is no longer tenable.

The reaction to this message in market forums such as ‘I Love Claims’ over the past 12–18 months suggests it has not yet fully landed. But the direction of travel is clear: insurers, MGAs, and suppliers all need to evolve how they work together to meet the FCA’s expectations.

What insurers and MGAs need to do differently

Placing Consumer Duty at the heart of the insurer–supplier relationship requires a more disciplined and outcome-focused approach.

First, performance management must move beyond traditional operational metrics. Insurers need consistent, outcome-based measures across their supply chains—covering areas such as settlement quality, customer understanding, complaints, and rework. Crucially, these measures must be comparable across suppliers, enabling firms to identify variation and act on it.

Second, contractual frameworks need to reflect regulatory reality. When claims handling is delegated or outsourced, expectations around Consumer Duty cannot remain implicit in the background. They need to be explicit about data provision, audit rights, and outcome-based performance.

Third, risk management must become more forward-looking. The FCA expects firms to identify “…foreseeable harm…”, which in practice means using data to detect where outcomes may deteriorate and intervening early. This requires both capability and focus—neither of which can be assumed.

What suppliers must do differently

The implications for suppliers are equally significant.

Delivering the service in line with a specification is no longer sufficient. Suppliers must be able to demonstrate that the services they deliver result in good customer outcomes and that they understand the regulatory context in which their clients operate.

This means being able to evidence performance in outcome terms, not simply activity. It also means aligning more closely with insurers’ customer and regulatory objectives, rather than operating purely to contractual or operational targets.

In practical terms, regulatory alignment is becoming a core component of supplier capability. Those who cannot demonstrate it will increasingly struggle to remain relevant in a Consumer Duty environment.

Conclusion

Consumer Duty is changing the nature of the insurer–supplier relationship.

It is no longer enough to deliver efficiently against a set of agreed activities. The requirement now is to deliver—and evidence—consistently good customer outcomes across the entire claims value chain.

As the FCA has made clear, firms must be able to “…monitor, assess, and understand the outcomes their customers receive…”. That expectation applies equally to what happens inside the organisation and across its supply chain.

At Prism Claims Group, we see this as an opportunity to strengthen collaboration among insurers, MGAs, and suppliers. By focusing on transparency, consistency, and outcome-based performance, it is possible not only to meet regulatory expectations but to build more effective and resilient claims solutions.

Because ultimately, in a Consumer Duty world, the standard is simple:

It is not enough to run the process well; the customer has to come out of it in the right place.