Background

On 10^th July 2026, the FCA published an update of findings from its review of how – and how well – firms across a broad range of sectors are tackling Consumer Duty Price and Fair Value Outcome requirements.  Fair value is broadly defined by the FCA as the reasonable relationship between the amount paid by a customer for the product or service and the benefits they can reasonably expect to get from it.

Drawing on insights gained from its reviews and supervisory engagement, the regulator has highlighted common themes and issues, citing examples of good and bad practice, so that firms have ammunition to strengthen their approaches to fair value assessment. If upon first reading examples do not appear to be relevant, the regulator wants firms to consider how the underlying principles apply to their own circumstances.

Introduction – smaller firms

The examples in this update are relevant to firms of all sizes. The Duty applies to all firms, but allows for a proportionate approach to assessing fair value, reflecting the nature, scale and complexity of a firm’s business and the product it offers.

In practice, this means that firms with simpler products or business models may use less complex processes and more readily available information when assessing fair value. However, firms are still expected to carry out sufficiently robust assessments. Where a firm’s products, pricing structures or business model are more complex, we would expect this to be reflected in the depth and sophistication of its assessment, regardless of the size of the firm.

The FCA’s key messages

• Fair value should now be deeply embedded in firms.
• Fair value assessments should reflect how firms make decisions in practice.
• Fair value assessments should be informed by relevant context from other Duty outcomes.
• A clear understanding of the target market and customer outcomes is fundamental to assessing fair value.
• Where firms apply differential pricing, they should assess outcomes for each customer group.
• Where assessments identify a risk that consumers may not receive fair value, firms must take prompt and effective action.

The FCA expects firms to think about price when assessing fair value, but it should not be the sole consideration.

• FCA rules do not set prices, require prices to be low, or require firms to charge the same as competitors.
• The FCA requires firms to assess whether they are providing fair value, and take action if they are not.
• The FCA wants firms to exercise judgment and find the most effective way of making sure their products and services offer fair value to retail customers, seeking continual improvement and learning lessons from their own and other firms’ experiences.

Finding 1 Embedding the price and value outcome within governance and decision-making

Good practice

• Firms maintain full records of the MI that Boards and governance committees considered during its review processes, and can produce it on request. 
• Senior decision makers consider a range of information, assessing whether customers are using the product as intended, if certain groups of customers are less likely to derive value, and if existing pricing structures remained appropriate in light of actual customer behaviour and outcomes.
• Records contain evidence of challenge by members of the Board or equivalent governing body, how issues were addressed, that revised proposals were placed before the Board or governance committee, and what changes were implemented as a result.

Areas for improvement

• Fair value assessments are produced retrospectively in an attempt to justify existing pricing and product design.
• No evidence of oversight and challenge at Board or equivalent governing body level.

Key takeaways for firms

The FCA expects firms to:

• integrate fair value into governance and decision-making;
• maintain clear evidence of Board challenge and oversight;
• document how risks of poor value were identified and addressed; and
• regularly review products using management information and customer outcome data.

Retrospective fair value assessments prepared solely for regulatory purposes are viewed as poor practice and indicate that the Price and Fair Value outcome is not embedded.

Where a firm manufactures or distributes complex products, its approach to fair value assessments must be sophisticated, regardless of the size of the firm. Similarly, a large firm with a simple business model and products may adopt a simple assessment process, provided it remains robust.

Finding 2 Considering fair value in the context of other Consumer Duty outcomes

Areas for improvement

• Firms assess fair value primarily by referring to the price and stated benefits of a product, ignoring how the product is used in practice, whether customers understand it at the point of sale, and whether they are supported to use it effectively.
• Fair value assessments fail to consider and/or incorporate MI indicating that customers were not engaging with key product features, using the product as intended, or accessing benefits that formed a significant part of the product’s value proposition.

Key takeaways for firms

No examples of good practice were cited, suggesting that firms have not considered how Consumer Duty outcomes are closely interrelated and, taken together, used to determine whether a product delivers fair value.

In particular, firms should consider:

• Unless a product has been designed to meet the target market’s needs, it is unlikely that the intended customer will receive meaningful benefits.
• Unless a customer understands the product features, they are unable to make informed decisions about, and use the product as intended. In addition, they may overestimate benefits, incur unintended costs, or fail to access features that are central to the product’s value proposition.
• Where the consumer support outcome is not met, customers may face barriers to realising benefits or switching, meaning that intended value may not be realised in practice.

Finding 3 – Assessing value

Robust fair value assessment requires firms to critically assess the proposition from the customer’s perspective.

The regulator has seen examples of good and poor practice regarding:

• Grouping products or services.
• Identification of the target market for a product or service.
• Consideration of the cost, benefits, and limitations of the product or service
• Appropriate benchmarking.

Again, these elements are frequently interrelated – something to bear in mind when considering the examples.

Grouping of products or services

Good practice

• Adoption of a structured approach, with an overarching fair value assessment for the core product, supported by supplementary fair value assessments for key components, reducing the risk that poor value in one aspect of the product could be masked by strong value in another. At the same time, firms maintain a clear view of the overall offering, including expected total price, and how the different components combine to deliver value.

Areas for improvement

• Differences between similar products are not adequately reflected in the assessment, creating a risk that the intended value of individual products is not properly evaluated.

Target market identification

Manufacturers must ensure that their products provide fair value to all retail customers in the target markets. Testing should ascertain if the target market includes any groups of customers with whom the product or service is generally not compatible. If monitoring shows that certain segments of the target market do not derive the intended value, firms must act.

Good practice

• Firms segment their target market into distinct groups based on criteria such as a customers’ objectives and needs.
• Firms consider how different groups of customers are likely to use the product, and identify behaviours that could lead to a risk of poor value.

Areas for improvement

• Firms define their target market too broadly, e.g., in the case of asset protection (GAP) insurance, “anyone who buys a car.” This definition failed to recognise that the product will not deliver meaningful value to drivers of older or lower value vehicles.

The product or service fees, charges, benefits, and limitations

A manufacturer must base its assessment of fair value on the expected total price, including all fees, charges and other costs that a customer would normally incur. Where fees and charges vary depending on how the product or service is distributed or used, firms must consider how best to assess the overall price.

Good practice

• Firms recognise the potential risks associated with fee structures that don’t feature a monetary cap or other appropriate controls, with well-considered and proportionate repayment structures, taking into account the customer’s circumstances and the overall impact of the charges.
• Firms assess the total price paid by customers across the full range of options associated with the product, rather than considering individual fees/charges in isolation.
• Firms draw on verified data on customer behaviour to estimate typical usage patterns. (Whilst the example related to bank accounts, insurance intermediaries might apply the same principle to the frequency of premium defaults, mid-term adjustments and cancellations, where these transactions attract additional fees.)
• The product manufacturer’s governance arrangements include oversight of third-party products and services commonly sold alongside the core product, including regular review and challenge of their pricing.
• Firms have good data on fees/charges paid over the lifecycle of a product, and are able to point to the average for different groups of customers.
• Firms are able to clearly link the fee amount to the effective cost to serve the customer, with illustrative examples for different customer groups (also relevant to consideration of costs to the firm.)

Areas for improvement

• Firms applied commission-based fees without having explained how these fees were determined or the circumstances in which consumers would be liable for them. The approach resulted in different outcomes for consumers in similar circumstances, with some consumers incurred significant additional costs without evidence of a clear rationale.
• Firms did not demonstrate that they had assessed the impact of the fee structures on consumer outcomes.
• Firms retained interest on client money without demonstrating how this related to the cost of serving those customers or the benefits delivered, relying instead on disclosure as evidence of fair value.
• While firms who used time-based charging disclosed hourly rates, they failed to provide an estimate of likely total costs or cost ranges, and there was no upper limit on those charges.
• Firms applied multiple fees to a single client account without clarifying what each charge related to and creating the risk that customers are paying more than once for overlapping and/or duplicative activities.
• Firms relied heavily on products being free or low-cost as a basis for concluding they provided fair value, without considering how additional fees/charges might arise, or non-financial costs customers might incur in accessing products and services, including time, effort and the cost of accessing benefits.

Benefits and limitations

When assessing the benefits and limitations of a product or service, firms should not focus solely on describing product features or intended advantages, but consider verified customer experience, such as the rate of customer usage of key features, claims or service take up. This is particularly important where firms rely on these benefits to justify the price charged in their fair value assessments.

Good practice

• Firms used MI to track how customers use different product features to assess whether they are realising the intended benefits of the product and that the intended benefits are meaningful.
• Where a product feature was under-utilised, firms reminded customers of available features, or supported them to switch to a more appropriate product where it was clear the existing product didn’t meet and or exceeded their needs.
• Firms used insights about how customers used products to adapt product design and pricing structures, refining or removing underused features and simplifying product offerings.

Areas for improvement

• Firms referred to the ‘peace of mind’ as a product benefit, but could not substantiate this claim with evidence based on claims frequency and payments.

Evidence of appropriate benchmarking

Whilst the regulator accepts that firms can refer to comparable products for benchmarking, firms should be able to explain the rationale for selection of comparable products and identify any limitations that could affect comparability. The FCA points newer or more innovative market as areas which may make benchmarking difficult.

Good practice

• A firm benchmarked its product against a broad and representative cross-section of the market, thus avoiding reliance on a narrow or favourable comparison. This approach enabled the firm to identify outlier scenarios, particularly for higher-value transactions, where customers may be paying significantly more than in the wider market.

Areas for improvement

• Where a firm concluded that there were no directly comparable products, it selected products from a different market as its primary comparator group without being able to demonstrate the rationale underpinning its approach/ why the comparison was appropriate.
• Benchmarking relied on assumptions that could not be evidenced.
• Firms placed significant weight on benchmarking to demonstrate fair value, rather than use benchmarking as a starting point, and conducting their own assessment.

Key Takeaways

The FCA expects firms to assess value using evidence of actual customer outcomes rather than relying on product features or pricing alone.

Key expectations include:

• clearly defining target markets;
• grouping products appropriately for assessment;
• considering the total price paid, including all fees and charges;
• assessing both financial and non-financial benefits and limitations;
• using management information to understand how products are used in practice; and using market benchmarking as supporting evidence rather than proof of fair value.

Assessments should reflect customer behaviour and outcomes, not assumptions.

Finding 4 – Differential outcomes

Where monitoring demonstrates that any group of customers within the target market is experiencing different outcomes than other groups of customers of the same product, firms should consider:

• Whether customers who have characteristics of vulnerability are less likely to receive fair value; and
• Whether the product provides fair value for each of the different groups of customers in the target market, taking all pricing variables into account.

Good practice

• A firm analysed how different groups of customers used the product, looking at a range of metrics. It then assessed the premiums charged to each group to understand whether certain groups paid more and if they were receiving fair value, e.g. owners of motor cars sub-divided by driver experience and age.

Areas for improvement

• Firms grouped customers, but there was no rationale for group definitions, or how this might relate to fair value assessment.

Assessing outcomes for vulnerable customer groups

Firms must have appropriate regard to the nature and scale of vulnerability within their target market and assess the impact this may have on customer needs. At the same time, firms must consider the individual needs andcharacteristics ofthose customers, and assess the impact these characteristics may have on the likelihood that they may not receive fair value.

Good practice

• Firms take a structured approach to identifying and monitoring outcomes for customers with characteristics of vulnerability, e.g., a firm used a ‘care flag’ on customer accounts to record characteristics of vulnerability identified, visible throughout the organisation. This allowed the firm to identify where these customers were at greater risk of poor outcomes, e.g., if they were less likely to engage with the product, or more likely to abandon a valid claim.
• Firms use the FCA’s value measures data (comparative data on claim acceptance rates, claims frequency, average claims paid, and complaints) to assess if they are outlier firms.
• Firms used insights from verifiable data to inform decision making, including reviewing product design, pricing and communications, and took targeted action to improve outcomes for vulnerable customers.

Areas for improvement

• Firms failed to highlight the support available to consumers, train staff to recognise signs of vulnerability, or encourage and create opportunities for consumers to disclose their needs.
• Data was not broken down by product, sales channel, or customer type to show whether vulnerable customers were treated differently.
• Fair value assessment frameworks failed to document the criteria used to recognise vulnerability or highlight support and encourage its use where appropriate. This increased the risk that poorer outcomes for customers with characteristics of vulnerability are not identified or addressed.
• Cash settlement values were set at levels that didn’t genuinely reflect the cost of repair or replacement, that the basis for settlement calculation was not explained. Customers accepted cash settlements without understanding that the amount might be insufficient to fund the reinstatement had suffered real financial harm.

Differential pricing

Where differential pricing is applied to customer groups, outcomes must be assessed for each group, ensuring that differences between groups can be justified (particularly where a group or groups generate higher income that supports lower pricing elsewhere, and demonstrating how each group will receive fair value. Firms must not rely on customer inertia or behavioural biases to maintain such pricing differences. They must ensure pricing structures are transparent and that customers are able to understand their options and switch where appropriate.

Areas for improvement

• Firms did not adequately consider the role of customer engagement in driving outcomes. In particular, firms did not assess whether customers in off-sale accounts were less likely to review or switch products, and the extent to which this resulted in those customers remaining in lower-rate accounts over time.

Considerations for firms

Where different customer groups pay different prices and/or experience different outcomes, firms must assess whether each group receives fair value.

The FCA expects firms to:

• identify meaningful customer segments linked to how customers use and experience the product in practice.;
• assess outcomes separately for each group, including the overall price paid, the benefits received;
• assess outcomes for customers with characteristics of vulnerability; and
• justify any differential pricing using objective evidence rather than customer inertia or behavioural bias.

Finding 5 – Considering costs to the firm

Firms may consider the costs to manufacture and distribute a product in their fair value assessments (see PRIN 2A.4.9G(1)).

Good practice

• Firms were able to demonstrate economies of scale in cost to serve customers when delivering more than one product or service, and reflected savings in the fees/charges applied to customers.

Areas for improvement

• Firms cited cost to serve as a reason for a fee or charge when distributing low premium products, but failed to elaborate and/or identify the relevant cost and margins.
• Firms’ business models featured high customer acquisition costs resulting from low conversion rates, meaning that the customers who purchased a product covered the costs of a much larger number of customers who didn’t purchase a product, without clear evidence that these charges reflected the benefits they received.

Key takeaway for firms

Although firms may consider their own costs when assessing value, the FCA makes clear that higher costs do not automatically justify higher prices. Equally, a low-cost policy doesn’t automatically mean that fair value is being delivered

Where firms rely on cost information, they should be able to explain how costs relate to customer benefits. Firms should also consider wider customer costs, including time, effort and inconvenience, rather than focusing solely on headline pricing.

Finding 6 – Mitigating Actions

As set out in the FCA’s rules, the Duty requires firms to take appropriate action if they identify that customers are not receiving fair value, or that any group of customers are getting worse outcomes than another for the same product.

Good practice

• Firms clearly set out the nature and scale of the concern, e.g., customer groups affected and how, clear rationale for the mitigating action implemented, and the metrics used to assess whether the intervention reduced or resolved the risk of harm.
• Concerning premium finance, firms take proactive steps to improve customer outcomes, by identifying that the overall cost of credit, including interest rates and fees, may not have represented fair value relative to the benefits delivered to customers. In response, they implemented changes to their pricing structures, including lower interest rates, arrangement fees and late payment charges.
• Firms’ ongoing monitoring of customer outcomes considered wider market conditions, including changes in the UK base rate, and were aimed at ensuring that the total price paid by customers remained reasonable relative to the benefits of the product, such as the ability to spread payments. Firms were able to evidence how these changes improved outcomes, through reductions in the overall cost of credit.

Areas for improvement

• A firm acknowledged potential risks of customers receiving poor value on their savings account and wrote to customers to tell them they are getting a low rate on their savings account, but didn’t set out what actions the customer might want to take to receive better value.

Considerations for firms

Identifying poor value is only the first step.

The FCA expects firms to:

• investigate the root cause;
• implement appropriate remedial action;
• monitor whether interventions improve customer outcomes; and
• maintain clear evidence linking identified issues to corrective action.

Conclusion

The FCA’s review demonstrates that firms are expected to treat fair value as an ongoing governance process rather than a periodic compliance exercise. Robust assessments should be evidence-based, customer-focused and integrated across all Consumer Duty outcomes.

With increasing emphasis on customer outcome data, governance records and firms’ ability to demonstrate how pricing decisions deliver fair value for different customer groups. firms should review their fair value frameworks, governance arrangements and monitoring processes to ensure they remain aligned with the FCA’s evolving expectations.

UKGI can help

We can assist you in considering your firm’s approach to fair value assessments.  If you have any questions about, or need any support in relation to, any aspect of Consumer Duty and measuring outcomes, we will be happy to discuss how we can assist.