Consumer Understanding Outcome

Following on from our communication focusing on the Price and Value outcome, below we concentrate on the Consumer Understanding outcome and what it means to AXA, our customers, and brokers.

Who is affected?

The Consumer Understanding outcome applies to firms involved In the production, approval, or distribution of customer communications, regardless of whether the firm has a direct relationship with the customer. As with Principle 12 and the cross-cutting rules, this Consumer Duty outcome covers consumers, individuals acting in a business capacity and SME customers and potential customers. It doesn’t apply to reinsurance, contracts of large risk sold to commercial customers or other contracts of large risk where the risk is located outside the UK.

What is it?

Customers can only be expected to take responsibility for decisions when firms’ communications clearly explain products and services, benefits and exclusions, setting out expectations for both the customer and the firm. The aim is for firms’ communications to support customers so they can make informed decisions regarding their financial objectives. As part of Consumer Duty supervision, the FCA will monitor how firms will meet this outcome and may take action where they find firms are not acting to prevent or redress customer harm as a consequence of communication issues.

The Consumer Understanding outcome builds on the existing ‘clear, fair and not misleading’ Principle, but goes further by requiring firms to:

  • Support customer understanding by ensuring communications meet the information needs of customers, that they are likely to be understood by the intended recipients and equip them to make effective, informed and timely decisions;
  • Tailor communications to consider characteristics of the recipients, including any characteristics of vulnerability, as well as product complexity, the communication channel and the role of the firm;
  • When interacting with a customer on a one-to-one basis, where appropriate, tailor communications to their information needs, giving them the chance to ask questions and check their understanding;
  • Test, monitor and adapt communications to support understanding and good customer outcomes.

This outcome applies to all elements of the product lifecycle and covers marketing, sale and post-sale. Verbal, visual or written communications across all channels are in scope.

Crucially, what firms should be asking themselves is whether they are applying the same standards to delivering good customer outcomes across communications as they do for ensuring delivery of sales and revenue. Equal focus across sales and service is required as part of this outcome. 

What does this mean?

We have developed a risk based approach for reviewing, testing and monitoring our communications. Below, we outline what this outcome means for AXA and the impact for customers and our broker partners. 

Key elements of this outcome AXA's role* Customer Impact* Broker Impact*
Equipping customers to make effective decisions
  • Communications are subject to approval processes which consider the needs of customers to help them make informed decisions
  • Communications are reviewed through a customer lens, ensuring key information is prominent and avoiding information asymmetry (where the insurer has more or better information than the customer) and use of jargon
  • Where mandatory disclosures or technical terms are required, we will consider whether supporting information is needed
  • Communications are presented clearly and in an engaging manner, with particular focus given to supporting customers when we want them to act 

  • Customers understand our communications and are supported across the lifecycle
  • Customers can be assured that we provide fair and relevant communications, at the right time, to help them make informed choices
  • We do not deliberately exploit behavioural biases

  • You may also be required to complete reviews of your own customer communications, if relevant to your distribution arrangements and how you interact with customers 
  • If you identify potential or actual poor customer outcomes because of our communications, please do let us know so we can take the right action 

Ensuring information is provided on a timely basis
  • We provide communications at the right time to help customers make informed decisions 

  • We review customer journeys through a customer lens, looking at how we present information pre and post-sale 
  • Customers can be assured we will communicate key information at relevant times throughout our relationship to help them make informed and effective decisions 
  • You may need to consider your communication timings with customers, to ensure this provides them with sufficient opportunity to review and understand the information 
Communication channels
  • We provide choice when it comes to how our customers communicate with us, offering effective offline and online channels
  • Customers can interact with us through multiple channels and be confident that, if required, we have processes to adjust how we communicate with them
  • Depending on your relationship with customers, you may also be reviewing the communication channels you offer and how effective they are in delivering good customer outcomes
Tailoring communications
  • We have a programme of ongoing activity to review our policy documents and customer communications, including engaging with third parties, to ensure that target market customers understand our communications with them
  • We provide alternative formats, such as Braille or audio. Characteristics of vulnerability are considered as part of our work on customer communications
  • Customers can be confident that our communications will be focused around the information needs of the target market
  • Customers with characteristics of vulnerability are easily able to request alternative formats and can be assured we offer reasonable adjustments 

  • Similarly, you will need to consider your own communication strategy to ensure delivery of good customer outcomes

Testing communications
  • Where appropriate, communications are tested to ensure consumer understanding and will be adapted if improvements or issues are identified
  • We have a risk-based framework which we apply to testing communications, using insight testing, customer outcome testing, customer feedback, focus groups and other assurance activities

  • We have communication principles focused on consumer understanding and good customer outcomes
  • Customers can be confident that communications have been tested so that they can understand them and make informed decisions 

  • You may be required to test the communications you produce
  • You should let us know if you identify any issues with our customer communications so that we can make changes if required
Ongoing monitoring
  • We use MI to monitor that our communications are supporting customers to make informed and timely decisions and responses
  • We will investigate any issues and make changes when we need to, responding swiftly to any foreseeable or actual customer harm, adapting communications and remediating when appropriate 
  • Customers can be confident that communications have been reviewed through a customer lens 
  • You can be confident that our communications are monitored to ensure they are driving good customer outcomes
  • We welcome any feedback you may have on an ongoing basis

*Examples are illustrative and not exhaustive

Working closely together and sharing information will help us to collectively oversee and deliver customer understanding through our communications and interactions with our customers. Testing and ongoing insight is crucial to how we assess customer understanding. If you have any questions, please get in touch.