The Financial Conduct Authority's (FCA) Consumer Duty aims to ensure that firms provide products and services that genuinely meet consumers' needs. Our latest consumer research on pet insurance in the UK raises questions about whether the sector is meeting this duty. Do pet owners really understand what they are buying, and is there a regulatory need to address this?
The Misunderstanding of Standard Features
Surprisingly, just over 1 in 10 insured individuals (14%) are either unsure or believe that their policy does not cover standard features such as injuries or illnesses. This lack of understanding can lead to unexpected out-of-pocket expenses and stress for pet owners.
According to the FCA's Consumer Duty, firms should act in the best interests of consumers. However, the data suggests a failure in the duty to provide clear and understandable information, potentially necessitating regulatory intervention.
The Illusion of Comprehensive Coverage
On the flip side, a significant number of policyholders believe they are covered for things that are typically excluded from standard policies. Over a third think their insurance covers pre-existing conditions or preventative care. Moreover, 2 in 5 (42%) believe they are covered for regular check-ups, and 38% think their policy includes vaccinations and boosters.
The FCA's cross-cutting rules emphasise that firms should consider the needs of consumers at every stage. This discrepancy in consumer understanding indicates that firms may not be adequately considering consumer needs or providing clear information, thus falling short of the FCA's expectations.
Confusion Over Policy Types
The data also reveals that many pet owners are unclear about the type of policy they hold. For instance, some assign impossible cover limits or policy types to insurers that don't offer such options. Around 50% believe they have lifetime cover, whereas the actual figure is likely closer to 80%.
The FCA expects firms to deliver specific outcomes that show they are acting in consumers' best interests. However, from a consumer perspective, the pet insurance market is full of product complexity that could ultimately leave them at financial detriment.
The Appetite for Additional Services
Interestingly, where people are aware that certain features are not included in their policy, there is a staggering appetite for these to be added. A whopping 73% would like dental treatment to be covered, while 63% wish for regular check-ups and vaccinations/boosters to be included. Just over half (57%) would like cover for pre-existing conditions, and 45% express a desire for flea/worming treatments and preventative care to be part of their policy.
The FCA expects firms to ensure they are providing products that genuinely meet consumer needs, and where firms fail to do this, they expect to see remediations implemented. Given the strong appetite for additional services, there is not only a market opportunity but also a potential regulatory need for innovation. Firms that proactively address these gaps could not only gain a competitive edge but also align more closely with the new regulation.
Should pet insurers prepare for regulatory scrutiny?
The data highlights a significant gap between consumer understanding and the actual provisions of pet insurance policies, and therefore high potential for consumer harm and financial detriment. This raises questions about whether the sector is meeting the FCA's Consumer Duty. A regulatory review could be warranted to ensure that firms are acting in the best interests of consumers, providing clear information, and offering products that genuinely meet their needs.
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