In 2018 the Financial Conduct Authority began a series of consultations to strengthen consumer protection, recognising that ‘the extent and long-standing nature of consumer detriment indicate that cultural change is required within firms and the market as a whole’.
In 2021 the FCA proposed ‘a new Consumer Duty’, a reformed regulatory structure to tackle consumer harms. The FCA highlights harms such as exploiting consumers’ behavioural biases, offering products that do not meet consumer needs, discouraging consumers from leaving unsuitable products or services, and poor customer service.
The FCA published final rules for the Consumer Duty in 2022. They came into force in July 2023 for products and services open to new business, and from 31 July 2024 for closed products and services.
The IFoA supports the FCA’s focus on outcomes rather than compliance with rules, on enabling better decisions, and on the needs of consumers, especially vulnerable ones. We agree with the FCA that the four key elements of the firm-consumer relationship are communications, products and services, customer service, and price and value. Our consultation response highlighted the risk that some consumers may not like ‘good outcomes’, preferring ‘low prices in the short term’, which may allow such customers to insist on bad choices.
The FCA relies on levers such as fines for firms and redress for consumers to tackle serious misconduct regarding Consumer Duty. We have proposed that the FCA should apply sanctions against individuals for breaches that lead to widespread poor outcomes.
In December 2024 the FCA published its Consumer Duty focus areas for the rest of 2024-25. These include:
A University of East Anglia (UEA) study has found that hormone replacement therapy (HRT) could boost life expectancy among healthy women.
The IFoA-commissioned study is the first of its kind to look at the impact of HRT on overall life expectancy using UK primary care data. It followed 105,199 healthy women aged 46 to 65 years at first HRT prescription over up to 32 years. There was an average follow up of 13 years and it compared their outcomes with 224,643 non-users of the same age and GP practice.
This positive data is especially important because HRT has been controversial for many years, due to conflicting reports about the long-term risk of breast cancer. This research strengthens the emerging consensus that for most women the benefits of long-term HRT outweigh the harms.
Ahead of the second reading of the Menopause (Support and Services) Bill on 29 October 2021, the IFoA sent a briefing document to interested parliamentarians. Those included members of the All-Party Parliamentary Group (APPG) on Menopause. The group took the report into consideration as part of its inquiry into HRT, published in October 2022. Read more on the report.
The UK’s National Health Service (NHS) has identified population health management (PHM) as a key component of its long-term plan to develop integrated local healthcare systems that provide the right care at the right place and at the right time. PHM uses data to inform the development of interventions tailored to local at-risk population cohorts, aiming for improved outcomes with reduced unwarranted variation between cohorts.
The IFoA Population Health Management Working Party has been working with the NHS on impactability modelling, and is undertaking further work to build understanding around how actuarial science can support PHM in healthcare systems.
When the Financial Services and Markets Bill was announced in the Queen’s Speech in May 2022, we welcomed the proposals to support public confidence in financial services by ensuring continued access to cash across the UK.
The IFoA has highlighted the importance of managing the process of declining cash usage carefully. If discussion of a ‘digital pound’ turns to implementation, this should be part of a broader plan to manage the transition towards a less-cash society. We believe the government should ensure that the growing cost of using cash is not passed on to those vulnerable groups that still rely on it. We therefore welcomed giving powers to the Bank of England to take necessary actions to ensure the sustainability of the cash infrastructure.
We have encouraged HMT to initiate and deliver a comprehensive transition programme, to ensure as many people as possible are equipped to use electronic payments for a sustainable future.
AI has been with us for some time, be it in the form of Amazon’s ‘Alexa’ or an everyday smartphone. It is at its plainest a technology that combines science and datasets to enable problem-solving. Frontier AI on the other hand represents the forefront of AI research. It is this that began to capture the imagination of the world in 2023. Frontier AI can perform a wide variety of tasks like never before. It is being constantly augmented with tools to enhance its capabilities. And it is being integrated into systems that may have a transformative, irreversible impact on the economy and society.
In September 2023, following the UK’s first major response to AI through its AI white paper, the UK government established a Frontier AI Taskforce. Backed by an initial £100 million, the taskforce brings together scientific experts who have been charged with advising the government on:
This was followed in October 2023 by a paper on frontier AI’s capabilities and risks.
Rather than creating a single new AI regulator, the UK government is encouraging existing regulators to consider how best to regulate AI within their sectors. The UK’s approach to managing the rise of frontier AI contrasts with the US and EU, which are taking an overarching regulatory approach.
In November 2023, the UK hosted the world’s first AI ‘Safety Summit’. This event represented the fruition of voluntary agreements between nations and courting of private sector partners and cooperation to encourage growth of the technology.
AI is already offering a range of societal benefits including:
But it can also generate or exacerbate a range of challenges, which are very relevant to the wider public interest.
One potential challenge is determining a regulatory definition for AI given the ongoing rate of its technological progress. It may become invalid, irrelevant, or outdated quite quickly. Another challenge would be the adoption of an AI definition that is too complex, specific, or constraining. That could restrict the scope of corresponding regulation and may also create potential loopholes. As an alternative, we suggest devising a simple, broad principles-based description of what is meant by AI. This is a position now adopted by the UK government.
We also believe there is a general risk in firms using AI outside their ‘zone of competence’. They may inadvertently open themselves up to a range of unintended consequences. This is plausible given the rate of technological progress in AI, or where there is a dependency on external parties in procuring AI infrastructure.
Specific key risks also include:
Lastly, AI could also be associated with discriminatory decisions, including in respect of individuals with protected characteristics. Although such discrimination could be inadvertent, this does not lessen any consumer harm. One potential mitigant of bias in models and their data would be for firms to undertake robust testing. But there may be a limit on how much testing can be accomplished every time a model is updated.
Debates around the regulation and ethical use of AI are likely to be driven by the continuing and rapid evolution in this space.
We have not identified any current regulatory barriers. But it is important that any regulatory framework for AI balances proportionate management of risk with encouragement of innovation.
Overall, we welcome the UK’s ambition to become a world-leader on AI and we support the regulatory approach it is adopting. We hope our members’ insights can usefully inform this approach.