The FSCS noted that consumers were likely to face more demanding choices and correspondingly higher risks, but often with limited financial capability or other vulnerabilities.
In its document FSCS into the 2020s: Protecting the Future, it added that it had to “adapt to this changing environment and changing expectations”.
However, the body also highlighted that consumers needed to be aware of the risks they were taking on and that it could not protect those they willing exposed themselves to.
“FSCS should not protect consumers from risks they willingly and knowingly take on,” it said.
“But we should be alert to the evolution of existing products and to the development of new ones – whether inside current protection or totally new.
“For example, from 2018, FSCS protected money placed with debt management companies for the first time.”
Recovering money, reducing levies
The FSCS emphasised the importance of it providing value for money and said it would work to improving its transparency and accountability.
This will include cost benefit analysis on strategic investments, clear performance indicators and the aim for reducing levies by recovering more cash.
“We shall continue to pursue recoveries wherever it is economic and practical to do so and so reduce the levies we raise on firms to finance our compensation and management costs,” it added.
Dealing with vulnerable customers is a key theme for the financial services industry at present and the FSCS agreed, noting that roughly half of UK adults showed characteristics of potential vulnerability.
They have low financial knowledge or low financial resilience, poor health or have experienced a life event affecting their financial well-being, or some combination of these things.
Daunting claims process
However it acknowledged that it could do better and that it needed to improve its claims process, admitting that “customers also find our process daunting, especially for complex claims”.
“People can be put off by the time taken to gather the required information and evidence from third parties,” it said.
“Customers feel we could provide clearer and fuller explanations of our decisions.
“These frustrations contribute to the use of representatives to bring claims to FSCS – now running at 75% of claims in 2017/18 – despite the fact that our service is free,” it added.
Overall it sets out four strategic priorities for the next few years:
- Prepare – FSCS must be able to protect consumers in a crisis or in the event of major failures to maintain public confidence and financial stability.
- Protect – FSCS is known and trusted for protection that puts people back on track through outstanding customer experience.
- Promote – The full range of FSCS protection is known about and trusted.
- Prevent – FSCS collaborates with our regulatory and industry stakeholders to help prevent future failures and to reduce compensation costs.