Consumer Responsibility :
The Financial Services and Markets Act (FSMA) 2000 of UK states that ‘consumer protection’ objective must have regard to ‘the general principle that consumers should take responsibility for their decisions’. An efficient retail market relies as much on capable and confident consumers as it does on firms who treat their customers fairly. However, this does not in any way understate the responsibilities of insurance companies and their intermediaries in ensuring that the customers are given their due treatment as per the principles enshrined above.
For example, in spite of a consumer having clearly understood the impact of the investing in an Unit linked insurance policy, a complaint is preferred for unsuitable sale, the customer should take the responsibility of the decision taken by him after considering the risk factors.
In addition to this broad legal basis for qualified consumer responsibility, FSMA goes further in recognising that, for financial services, it is only reasonable toexpect consumers to exercise responsibility for their decisions if we address some of the inherent difficulties in the market. Specifically, FSMA states that appropriate consumer protection must have regard not only to the principle of consumer responsibility, but also to:
• the needs that consumers may have for advice and accurate information;
• the differing degrees of experience and expertise that consumers may have in relation to
• different kinds of products or services; and
• the differing degrees of risk involved in investments or other transactions.
The customer responsibilities include the following:
• read advertisements and other material carefully;
• engage properly with the firm and provide accurate information, raising questions if uncertain
• about any aspect;
• read any suitability letter and ensure that it properly reflects the discussion;
• use cooling off periods to consider whether to go ahead;
• review financial needs on a regular basis and consider taking further advice when
• circumstances change; and
• complain to the firm if they perceive unfair treatment.
If consumers do all these things, then they will have maximised their chances of:
• making a good decision that is in their own best interests;
• protecting themselves against any improper or poor quality behaviour
• by the firm; and
• putting themselves in a position to tell as good and persuasive an account as possible of their
• own actions and thought processes to a court or ombudsman, should any dispute over the
• transaction go that far.
The FSA’s approach to these issues is that it is reasonable that, where a firm fulfils all its obligations and treats the customer fairly, then even if a transaction turns out to be disappointing for the customer this should not be blamed on the firm. Otherwise fear of unpreventable liabilities would deter business to the detriment of firms and customers. Furthermore, the absence of reasonable care on the part of the customer might be a relevant consideration when a complaint against a firm by a consumer is being considered by the firm, by the FOS or by the courts. Put simply, if customers fail to take reasonable care they may find that they reduce the protection they can expect under the law. But, in a strictly legal sense, consumer actions cannot be described as responsibilities. And when considering complaints, firms need to examine the circumstances of the individual case carefully. An attempt to shift responsibility onto the consumer just on the basis that he or she has not read the written contract will often be simplistic and will not be treating the complaint fairly.