The Financial Conduct Authority (FCA) is to go ahead with the introduction of new rules which will require firms to report and publish data on general insurance (GI) value measures, alongside new product governance requirements. The new rules, which aim to help address poor product value, were first published in Consultation Paper CP19/8 and proposed requiring firms to report GI value measures data to the regulator on an annual basis by calendar year for publication. The FCA expects the new rules to shine a light on the value of products in the market as well as complement and strengthen the remedies put forward in its GI pricing practices consultation.
The FCA has been piloting the use of value measures data with firms since 2016 after an earlier market study of GI add-ons had identified that consumers were purchasing products that were of poor value and not what they needed. The pilots tested the publication of three data metrics (claims frequencies, claims acceptance rates and average claims pay-outs) for four insurance products (home, home emergency, personal accident and key cover).
Policy Statement 20/9 (PS20/9), entitled General Insurance value measures reporting and publication, will require firms to report value measures data covering claims frequencies, claims acceptance rates, average claim pay-outs and claims complaints as a percentage of claims. Firms will also have to ensure that their products offer fair value to customers in the target market they are aimed at as required by the FCA’s existing rules. Members may access CP20/9 by clicking here.
Based on the feedback received the FCA said it is implementing the rules as set out in CP19/8, although it had made some changes and had reassessed its Cost Benefit Analysis upwards. The changes made involved:
- including additional GI products – such as alloy wheel insurance, vehicle cosmetic insurance, mis-fuelling, pot-hole cover, event and wedding insurance;
- removing private medical insurance from scope;
- replacing the requirement for firms to report data for different distribution arrangements separately, with a requirement for them to report the names (but not the data) of the firms and/or brands which represent the largest five distribution arrangements;
- removing the requirement for vehicle breakdown firms to report average claims pay-out data;
- removing the requirement for firms to report the amount that the highest 5% of claims are above;
- minor adjustments to the metric and product definitions and clarifications (see pages 24-27 of the policy statement)
The FCA is not including bloodstock, specialist fine arts and antique insurance in the requirements as these are more likely to be bespoke and so less comparable. However, the FCA said that it plans to conduct a post implementation review to consider the impact that its rules and guidance in this area have had, so scope would be looked at again then.
In most circumstances insurers will be responsible for reporting value measures data. Exceptions to this approach include certain types of EEA business and business where there is no authorised insurer. The onus will be on UK intermediaries to report data.
The product governance rules for firms to consider whether their products offer fair value to customers will come into force on 1 January 2021. The new reporting rules for reporting value measures data will not come into force until 1 July 2021. However, for the purposes of the product governance rules, during the transitional period between 1 January 2021 and 1 July 2021, SUP 16.27R will be deemed to take effect to enable the product governance rules that refer to them to operate. Members should see page 8 of the policy statement for further details.
BIBA members’ compliance and regulation queries should be directed to: [email protected].