The FSRC has published the transcript of the consumer insurance market oral evidence session attended by David Geale, FCA Executive Director of Consumers, Payments and Competition, and Chris Knight, FCA Director of Insurance.
Geale responded to most of the Committee’s questions, given how new Chris Knight is in his position. The FSRC launched this inquiry to find out if the insurance market is working for the many people who buy home and travel insurance. The Committee wants to find out whether the current regulations are effective, whether they are properly enforced, and whether there is anything that the regulators and Government need to do differently. The Committee welcomes evidence and views from anyone with expertise or interest in this area.
- The FCA was under early pressure by not being able to answer how many people at the FCA work on home and travel insurance (understandable as the FCA is not set up along product lines), but Geale did refer to the six Enforcement cases involving insurance and the Consumer Duty (indicating that a number of people are working on that).
- When asked about the success or otherwise of the Consumer Duty, Geale referred to the GAP intervention, and the six Enforcement cases again. Knight spoke about the ongoing work on trying to standardise across the industry definitions of storms and ‘wear and tear’.
- Geale provided Supervision statistics (without mentioning the relevant time period):
- 241 communications directly to firms;
- 41 Section 165 information requests;
- 26 VREQs;
- a “number” of Section 166 skilled person reports requests; and
- eleven instances of customer redress.
- The Lords brought up Consumer Understanding as a significant issue, which Chris Knight acknowledged and said it manifests in terms of lots of complaints, claims that are rejected, underinsurance, etc., al of which firms should then react to under the Consumer Duty.
- In relation to AI, the Committee indicated that they found it useful and wondered why the FCA didn’t regulate ChatGPT like they do price comparison warehouses (PCWs). Geale struggled to explain the regulatory perimeter and the ‘by way of business’ test to them, but also commented that it is something that the FCA will continue to monitor, and that customers need to be aware that AI isn’t always correct.
- There was a debate on detailed rules versus the broader principles of the Consumer Duty, with Geale saying that he preferred outcomes to rules, liking the flexibility of the Consumer Duty. Geale used premium finance as an example (citing the FCA’s fair value review work, including what firms were charging, and the FCA’s challenges to a number of firms).
- There was discussion around outsourced claims handling and whether this was effectively overseen by the FCA. The FCA put forward its stance that this is the insurers’ responsibility, and the FCA holds them responsible. The FCA did agree about the low claims acceptance rates in home insurance, which is something that it is reviewing as part of its own work. Chris Knight gave some more granular information in that only 31% of storm claims are accepted.
- The Committee pressed the FCA on PCWs and that , although they show the price, there is no information on claims outcomes, and asked how could there be more data provided on this. The FCA’s response was limited to its ongoing post-implementation review of the value measures data.