FCA publishes the General Insurance Value Measures Data for 2022

In the FCA’s latest data, and from its ongoing interactions with firms, there are indications that some general insurance firms may be failing to comply with the FCA rules around offering fair value as required by PROD 4 and delivering good outcomes for their consumers under the Consumer Duty. The FCA has written to the insurance industry insurers warning that more action must be taken to ensure good consumer outcomes.

The latest insurance Value Measures Data (Jan-Dec 2022) reveals potential concerns over the value of GAP and other products to customers, and the FCA has highlighted this in its press release and has referenced the findings in its personal and commercial lines Portfolio Letter (published alongside the Value Measures Data).

  • GAP insurance remains a key focus for the FCA as it again features as the product with the lowest ‘claims costs as a percentage of premium’, at 4%. The FCA has told firms manufacturing GAP insurance products they must take immediate action to prove customers are getting a fair deal, or it will intervene – giving firms a month to address the issue.
  • Value is a key issue, along with the issues that go with it (product governance, the extent to which firms have embedded the PROD 4 and Consumer Duty requirements, customers not receiving fair value from some identified products, the quality of the value assessments for those products, value in the distribution chain). We recommend that firms review this FCA web page for a summary of the FCA’s main findings.
  • In relation to distribution chains, and in the FCA’s opinion, some do not clearly demonstrate how fair value is being delivered. The FCA has noted what would appear to be high commission levels, with no clarity about how certain products were being assessed to show they were consistent with fair value. The FCA sets out an example it has soon of high levels of commission in distribution chains for what appears to be a standard non-advised sale, where it was not clear how the commission levels had been assessed to support the delivery of fair value.
  • Matt Brewis, Director of Insurance, FCA said: ‘Customers should be reassured that we’re in their corner and are taking action where we see poor value being provided. If the firms are unable to prove they’re providing fair value to their customers, they should expect further action from the regulator.’
  • Many of the concerns that the FCA is seeing are potentially related to wider issues. Firms’ Boards should take note of this and make sure they are meeting their product governance requirements across all retail products.
  • In relation to claims costs as a percentage of premiums paid (which is a flawed measure where the policies run for more than one year – such as GAP insurance products), they range from 4% for GAP insurance (Add on) to 65% for Motor (All).
  • Many of the products commented on last time appear to still have the lowest proportion of claims costs to premiums written. These products include 4% for GAP Insurance (Add-on), 7% for GAP Insurance (Standalone) and 15% for Excess Protection (for Motor Insurance) (Add-on).
  • The larger retail insurance products recorded claims costs as a proportion of premiums written of 65% for Motor Insurance (all) and 50% for Home Insurance (buildings and contents combined).

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