Posted: 23rd November 2023
Delivering good customer outcomes is at the core of the Consumer Duty. As well as delivering good customer outcomes, the FCA has made it clear the onus is on firms to also be able to evidence how they are delivering good customer outcomes and, just as importantly, evidence where they have taken action to address underlying issues that lead to poor customer outcomes.
Monitoring customer outcomes is not a new concept. Firms have been doing it for a long time in the form of Quality Assurance, Complaints Root Cause Analysis, monitoring customer satisfaction such as tracking NPS and customer surveys. As a result, some firms may have relied on their existing customer outcomes monitoring frameworks for the July 2023 Consumer Duty deadline. So, what’s different now?
As is often the case in Consumer Duty, the FCA has taken the previous regulatory standards regarding outcomes monitoring and put them on steroids. Consumer Duty requires firms to take a more holistic approach to monitoring outcomes, across all three lines of defence, which goes way beyond the traditional methods of outcomes testing.
So, what methods of outcome monitoring should firms consider using?
- Point in time and end-to-end outcome testing is a must to ensure firms are holistically assessing all outcomes of Consumer Duty at an individual customer level. This may include existing activity such as call listening, quality assurance and file reviews, but these checks need to be focused on holistic outcome assessment rather than just checking policies and processes are being followed.
- Mystery shopping exercises can add significant value in response to potential risks and concerns.
- Compliance monitoring reviews and audits, delivering thematic testing, should focus on whether the business is delivering good outcomes routinely across the business. These should be scheduled based on risk appetite, inherent risk analysis, and risks that are identified through MI and other business and operational indicators during the year.
Business and Operational Indicators
Monitoring key business and operational risk indicators through management information and other mechanisms is key to being able to track whether good outcomes are being achieved at a collective level, by product / service, and for various types of customers.
These are some of the many key metrics that can help monitor outcomes:
- Product outcomes metrics such as take-up rates, product switching rates. abandoned claim rates, unusually low volumes of claims or declined / successful claims analysis.
- First contact resolution rates, average time to resolution, speed to answer the telephone and average wait times, call abandon rates, email, digital channel speed to answer and website or app outages.
- Metrics which assess whether the product or service functions as expected at the outset.
- Monitoring of responses to communications during customer journeys, including responses rates of calls to action and drop-out rates.
- Where changes are made to a product / service or to communications, relevant testing results to provide assurance that the product / service continues to deliver good customer outcomes.
- Financial metrics including revenue, profit margins and the cost of providing the product or service, including credit risk.
- Analysis of records of staff training, including remedial actions where staff knowledge or actions were found to be below expectations.
- Feedback from other firms in the distribution chain including manufacturers, intermediaries, appointed representatives or other third parties, and employees.
Customer and Staff Feedback
- Customer surveys that are focused on testing of customer understanding can be a really valuable way to test customers understand the key features or limitations of the product.
- Net Promoter Scores and other customer satisfaction survey data.
- Customer feedback, both formal and informal, such as complaints, comments on social media, third party review sites e.g., Trust Pilot.
- Focus groups (interviews of or testing system interfaces) with consumers or employees to test an approach to communications, or product and journey design.
- Staff feedback can sometimes help unearth issues that may be difficult to detect through MI monitoring, or challenges with processes and systems that could lead to delays or complaints.
Firms should ensure they have defined what good outcomes look like and the comprehensive set of methods they will use to monitor those outcomes. As we discussed in a previous Consumer Duty piece there is real benefit in mapping end-to-end customer journeys and associated risks to outcomes, and assessing how those risks will be monitored to ensure there aren’t any gaps.
Firms need to focus on how outcomes monitoring information will be aggregated across the firm and actively monitored. It is important firms can drill down into the detail behind top level management information to see risks and potential issues by product / service, distributor or customer type. Firms should also monitor leading indicators and not just lagging ones so that they can plan effectively to deliver good customer outcomes in the future as well as react to already occurring poor customer outcomes.
There is a lot to consider and there is no one size fits all approach. A range of factors should be considered by a firm when determining what a proportionate monitoring framework looks like including its size, resources, and level of risk to consumers. However, as a general rule of thumb the FCA expects firms to apply a comparable standard of capabilities to outcomes monitoring as they to do to generating sales and income.