Consumer Duty for MGAs and Brokers: What It Actually Requires

What Consumer Duty actually is

Consumer Duty came into force in July 2023 for new and existing products and services. It replaces the FCA's previous principles-based approach with a higher, outcome-based standard: firms must be able to demonstrate that they are delivering good outcomes for retail customers, not merely that they have followed a process.

The FCA's language is deliberate. The duty applies to the outcome experienced by the customer. A policy document, a sign-off procedure, or a training record is not evidence of a good outcome - it is evidence that something was done. What was achieved for the customer is a separate question, and the FCA expects firms to be able to answer it.

What it means specifically for MGAs and brokers

Consumer Duty applies across the distribution chain. For MGAs and brokers, this creates obligations that differ from - and in some respects are more complex than - those of insurers.

MGAs sit in the middle of the chain. They have product design responsibilities (as manufacturers) and distribution responsibilities (as distributors). They are responsible both for how the product is built and for how it reaches the customer. Capacity providers are now asking for evidence that Consumer Duty obligations have been embedded across both sets of responsibilities.

Brokers face a different version of the same problem. Their obligation is to ensure the products they recommend or place are appropriate for the customer's needs - and to have the data to demonstrate that appropriateness at the point of recommendation, not just at the point of sale.

The four outcomes - in plain English

Where firms are falling short

The FCA's reviews of Consumer Duty implementation have identified consistent gaps across the insurance distribution chain.

Product governance that exists on paper only

Many firms have product governance frameworks that describe a process without embedding it in operations. The product review meeting happens; the sign-off is obtained; the documentation is filed. But the analysis that would identify whether the product is delivering good outcomes for the actual customer base is absent or superficial.

Value assessments that cannot be substantiated

The FCA expects firms to be able to demonstrate fair value, not merely to assert it. A value assessment that says "our product is competitively priced" without the analysis to support that claim is not compliant. The data requirements here are more demanding than many firms anticipated.

Vulnerable customer identification that is not embedded

Almost every firm has a vulnerable customer policy. Far fewer have an operational process for identifying vulnerability at the point of customer contact and adjusting the interaction accordingly. The gap between the policy and the practice is where the FCA is focusing its attention.

Distributor oversight that is insufficiently robust

MGAs need to ensure their distributors - the brokers placing their products - are meeting Consumer Duty standards. This requires contracts, monitoring, and data flows that many MGAs had not built before the duty came into force.

Systems and data requirements

Consumer Duty has a data problem embedded in it. Demonstrating good outcomes requires data on customer experience that many firms do not currently collect, aggregate, or report in the right way.

At minimum, firms should be able to report on:

• Claims acceptance rates, including declined claim rates and reasons
• Complaints volumes, categories, root causes, and resolution outcomes
• Customer retention rates and reasons for non-renewal
• Vulnerable customer identification rates and outcomes
• Distribution channel outcomes (where the same product is sold through multiple routes)

For MGAs, this often means working backwards from existing systems - Acturis, Applied, CDL, SSP - to understand what data is available and what gaps exist. The systems were not designed with Consumer Duty reporting in mind. Building the reporting layer requires understanding both the data architecture and the regulatory requirement.

Governance obligations

Consumer Duty requires board-level ownership. The FCA expects boards to receive regular reporting on customer outcome metrics, to be able to demonstrate that Consumer Duty is a live governance agenda item, and to be able to evidence that concerns raised at operational level are escalated and acted upon.

For smaller MGAs and brokers, this creates a practical challenge. The governance infrastructure required is not trivial, and many firms do not have a dedicated compliance function capable of designing and running it. The options are to build it internally, to engage external compliance resource, or to embed the governance within an operational leadership structure that has both the regulatory knowledge and the operational authority to make changes where gaps are identified.

What good looks like

A Consumer Duty-compliant MGA or broker can answer these questions with data, not assertion:

• What proportion of our customers are receiving the outcome the product was designed to deliver?
• Where we are seeing poor outcomes, what is causing them and what have we done about it?
• How do we identify vulnerable customers, and can we demonstrate that our support processes adapt appropriately?
• How do we monitor our distributors, and what evidence do we have that they are meeting their Consumer Duty obligations?

If the honest answer to any of these is "we don't have the data to answer that properly", that is the gap to close - before the FCA asks the same question in a supervisory review.