On 30 January 2019, the FCA published General Insurance Value Measures reporting (CP19/8). In CP19/8 the FCA proposes to require firms to report general insurance (GI) value measures data to the FCA for publication. The FCA proposes to introduce these measures to address poor product value and quality and reduce the risk of sales of unsuitable GI products.
In its GI add-ons market study the FCA identified poor product value as a significant area of harm. The FCA committed to collecting data from firms on GI products to improve market transparency and competition. A discussion paper (DP15/04) set out option for the publication of GI value measures data. This was followed by a feedback statement (FS16/01, published in March 2016) announcing that a pilot would be run to see how the publication of value measures might work. The pilot tested claims frequencies, claims acceptance rates and average claims pay-outs in relation to home, home emergency, personal accident and key cover. The FCA found the publication of data had a positive impact, improving transparency and awareness of different indicators of product value.
In CP19/8 the FCA states that since launching its pilot in 2016 “product value (in terms of suitability and performance) has become an increasing concern for the FCA”. The FCA also states that product value is an important aspect of product governance and should be taken into account in the context of whether a firm is treating customers fairly.
In CP19/8 the FCA makes the following proposals:
- Product scope. The FCA proposes applying value measure reporting to all GI products with the exception of no claims bonus protection, packaged bank accounts and commercial products.
- Reporting responsibility. In most cases insurers will be responsible for reporting however there will be some exceptions including for certain types of EEA business and business where there is no authorised insurer (for example in respect of breakdown cover) where the intermediary will report instead. For most products sold in the UK by EEA firms (for example by the UK branch of an EEA firm) the FCA will require those firms to meet the reporting requirements themselves. However, where an EEA firm passports on a services only basis and there is a UK manufacturer of the product, the latter will be responsible for the value measures reporting.
- Elements of data reporting. The FCA proposes to retain the approach taken in the pilot by reporting by insurer and by add-on or stand-alone products (with the exception of legal expenses cover). The FCA also proposes further splitting data by distribution arrangements for each insurer. Data should be reported annually by calendar year.
- Value measures metrics and metric definitions. The metrics measured will include claims frequency, claims acceptance rate, average claim pay-out as well as claims complaints as a percentage of total claims.
- Publication. Data will be published by firm in bands on the FCA website.
- Impact of value measures on product governance. The FCA proposes that firms take value measures data into account when considering if their products offer value to their customers.
The deadline for responses to CP19/8 is 30 April 2019.