General Insurance × Compliance — United Kingdom · published 2026-05-26 · methodology v2.1

Harm-avoidance standard: the "reasonably believes" qualifier

RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003

What the RLB Specialist Panel found

1. Harm-avoidance standard: the "reasonably believes" qualifier

Question (paraphrased to protect IP): Does the Consumer Duty require firms to prevent all foreseeable harm to retail customers? What is the position where a customer understands and accepts a risk?
Source regulation: Consumer Duty (PS22/9 + PRIN 2A), Financial Conduct Authority (Regulator portal: https://www.fca.org.uk)
What AI assistants typically say: AI tools described the exception as requiring the firm to have acted in good faith, to have supported the customer's understanding, and to have avoided foreseeable harm caused by its own conduct — only then, if the customer accepts the risk, does no breach arise. The AI's version imposes three additional conditions not present in the rule text.
What the regulator actually says: Where a firm reasonably believes a retail customer understands and accepts such risks, it will not breach the rule if it fails to prevent them.
Why the AI went wrong: The AI dropped the rule's operative qualifier — "reasonably believes" — and replaced the single-condition standard with a multi-factor test drawn from surrounding Consumer Duty principles rather than this specific rule. The result is a more burdensome and inaccurate standard that conflates separate Duty obligations with the narrow harm-avoidance exception.
Cited source(s):
https://handbook.fca.org.uk/handbook/PRIN/2A/2.html — Pretextual
https://www.fca.org.uk/publication/finalised-guidance/fg22-5.pdf — Pretextual

Impact for this audience

A General Insurance firm that builds its Consumer Duty harm-avoidance policy or internal training on the AI's multi-condition formulation will set a standard that is stricter and differently structured than the FCA's actual rule. When the firm's approach is reviewed — through a supervisory visit, a section 166 skilled-person review, or an internal audit — the mismatch between the firm's documented standard and the FCA's text will require remediation, potentially including retrospective review of customer outcomes assessed against the wrong benchmark. Where senior managers have approved governance documents based on the AI's formulation, there is also an SMCR accountability dimension if the error contributed to poor customer outcomes.

References — raw findings (per AI model)

RLB-H-GB-FCA-CONSUMER-DUTY-PS22-9-Q003-Opus47 Claude Opus 4.7 (web search on)

This finding also affects

Next finding → Finding 2. Withdrawal of pre-Consumer Duty Dear CEO letters: count and timing

Cite this finding

Each finding has a stable Citation ID (RLB-F-… for aggregated case-study findings, RLB-H-… for raw per-model hallucinations) — like a DOI, the ID always resolves to the canonical finding even if URLs change.

Plain text

RegLeg Specialist Panel (2026). "Harm-avoidance standard: the "reasonably believes" qualifier — General Insurance × Compliance — United Kingdom." Citation ID: RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003. RegLegBrief AI Hallucination Research, published 2026-05-26. https://reglegbrief.com/audiences/sectors/gb/general_insurance/compliance/finding/GB-FCA-GB-001-CONSUMER-DUTY-PS22-9-v1-003/

APA 7th edition

RegLeg Specialist Panel. (2026). Harm-avoidance standard: the "reasonably believes" qualifier [Hallucination finding RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003]. RegLegBrief AI Hallucination Research. https://reglegbrief.com/audiences/sectors/gb/general_insurance/compliance/finding/GB-FCA-GB-001-CONSUMER-DUTY-PS22-9-v1-003/

Bluebook / OSCOLA (US + UK legal)

RegLeg Specialist Panel, Harm-avoidance standard: the "reasonably believes" qualifier [RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003], RegLegBrief AI Hallucination Research (May 26, 2026), https://reglegbrief.com/audiences/sectors/gb/general_insurance/compliance/finding/GB-FCA-GB-001-CONSUMER-DUTY-PS22-9-v1-003/.

BibTeX

@misc{reglegbrief_RLB_F_GB_FCA_CONSUMER_DUTY_PS22_9_Q003,
  author    = {RegLeg Specialist Panel},
  title     = {Harm-avoidance standard: the "reasonably believes" qualifier},
  year      = {2026},
  publisher = {RegLegBrief AI Hallucination Research},
  note      = {Hallucination finding Citation ID: RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003},
  url       = {https://reglegbrief.com/audiences/sectors/gb/general_insurance/compliance/finding/GB-FCA-GB-001-CONSUMER-DUTY-PS22-9-v1-003/}
}

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