Last week I spent time building the FCA Consumer Duty Lending Simulator, really as a bit of fun to promote our new refresher course around Consumer Duty essentials. Running through the detail, there was obviously plenty to consider around good customer outcomes… but also rally struck me was fair value assessments.
This was because, coincidently, and rather unfortunately for the firm involved, at the time I also received my contract renewal documentation. The letter informed me that my premium (it was insurance related) would go up by 20% this year… so I looking and vs 2023 it had consistently gone, in total by 72%.
Now, I am a year older, we all know about rising costs, but does this really justify the 70% over 3 years?
Insurance of course is notoriously tricky and some of this can be within the hidden or explained away within actuarial calculations of risk… however if am able to get a better price elsewhere this is an indication that the risk has not changed to that extent and whether this really offered Fair Value (this sits squarely in Financial Services).
… and for reference annual average inflation for the period is 7%, even going back to 2020 it was only 30%.
With my renewal rage over, this made me think of a series of discussions from my interview series…. exactly the weakening of the social contract we are seeing play out.
- In the debt advice sector, a breakdown in the contract between employers and employees, with stable employment in exchange for employee loyalty (discussion with Lee Healey and IncomeMax here)
In the enforcement sector, increasing aggressive behaviour towards field agents, with a belief that obligations for payment of council tax or other contracts never have to be met. (watch for my discussion with Sarah Naylor, at Dukes, coming out soon) - In the airline industry, where fees for cabin bags are being use to drive revenue, as much as protect the space for others on the plane.
- And in financial services, where premiums can rise by 70% in 3 years.
… and don’t get me started on the size of chocolate biscuit bars!
It feels like we are currently in a downward loop. Even in politics, this is happening. Popularism rising across all parties… resulting in reactions and policies squarely aimed at benefiting one group at the expense of another.
It is all short termism, a scrabbling over dwindling resources, with little balance. I fear the rush to the bottom will continue.
So where do we go from here. Well I think Fair Value offers us a sliver of light.
- Are we offering fair value for our customers, from our products.
- Are we acting in the best interests of our employees to treat them well and provide development.
- And, as customers, are we showing loyalty to firms that provide good service and a quality product at a fair price point.
Now I am not saying we should just give product away, never increase prices, or not complete to increase profitability. There will also still be a need to have difficult conversations and make adjustments in staffing, the world of business cannot stop…
However, I suppose this is an argument for us to be just fair in our approach, to ensure avoid seeing Customers, Employees and Firms as resources that can be exploited. It is trap, that in the long term does not make things better. By winning short term… we could in fact end up dead last.
… with AI, robotics, around the corner, and the potential for even greater societal change, this retaining our humanity, and staying in balance, could be just about to get even more important.
So, my thought for the week… have a good week everyone.
[on fair value… this weeks image is from a trip to the local cricket… £3 a ticket, it was value fair – yes, I got sunburnt!]
