Thursday, April 15, 2021

Responding to the FCA General Insurance Value Measures

New product governance rules for fair value to customers came into force on 1st January 2021, and the new reporting rules for value measures data will commence on 1st July 2021.

With July’s reporting deadline approaching Risk & Compliance Director Sharon Straughan and Managing Director Insurance Product Division Andrew Bennett, have been looking at the reporting measures for add-on insurance products, and the impacts these will have on retail and wholesale providers.

Sharon Straughan has oversight of all regulatory matters at Coplus, working with all operational and commercial teams to ensure we have the right approach and controls in place.

“Insurance product value is of significant concern to the FCA. In recent years the FCA has carried out a number of market studies and consultations to address this issue.

In 2018 the Insurance Distribution Directive (IDD) brought in product governance rules to ensure firms had the appropriate controls in place to assess the design and suitability of ancillary products for their target markets. Further action was taken In September 2020 when the FCA published Policy Statement PS20/9 which confirmed additional reporting requirements to expand value measures,” began Sharon.

 “At Coplus we see no benefit in avoiding or trying to ‘work around’ compliance matters. Our approach is to work with the regulations to be the best we can be for our partners and their customers. Being proactive, and staying ahead of changes means we take things in our stride. We work to understand the ‘what’ but also the ‘why’ behind regulatory changes,” stated Sharon.

“In the case of the new value measures reporting this means that we already collect all the data needed to meet the new requirements, it has already being established as a “business as usual” activity through our product governance process.”

Andrew Bennett has overall responsibility for the Insurance Product Division at Coplus. Ensuring fair value is extremely important in the relationships we have with underwriting partners and retail partners alike. “Whilst some manufacturers look to ‘make hay while the sun shines’ maintaining high margins and low loss ratios, we see such practice as short sighted. Value measures are here now and the FCA is intervening in products that don’t illustrate clear benefits to consumers. Ultimately without appropriate controls there will be penalties and costs for those manufactures, and those who sell their products, further down the line.”

Sharon continued, “Ultimately it is the role of the insurer to report the value measures to the FCA, but that can’t be done accurately without collaboration and clear reporting through the chain. The requirements state insurers need to report on their top five distribution arrangements, however the data we already capture within our monthly reporting cycle means all of our partners, retailing our policies, have no further action to take, and all data is available to our underwriting partners on all schemes.”

Our responsibility does not end there however. Andrew explained, “We look to build long term, sustainable relationships with our clients and ensure they have products which fit with their business model and target market. We want to ensure all of those we work with have confidence in the value of the policies they provide, anything else might deliver short term gain but will bear costs later, either financial, operational or reputational. 

So what does value mean in general insurance? Sharon replied, “Our expertise is in add on policies or ancillary insurance, in particular those within Home and Motor markets. The FCA has been homing in on these markets for some time. Specifically Home Emergency, Personal Accident and Key which come into July’s cohort for reporting with Legal Expenses, Excess and Gadget to be added in 2022.

As we know value is not just price. It is about the whole ease, benefit and suitability of the insurance product – from the buying journey, to the customer service of course, to making a claim. The data reporting aims to quantify these things by including information such as gross premiums, details of sales and complaints as well as claims data. It is easy to get lost in the measurement and data gathering and forget that really what this is about is doing what is honestly and truly in the best interests of the customer.”

Coplus has over 30 years of experience in ancillary insurance and claims handling. We would be delighted to talk to you about the benefits of working with us as your product partner. Coplus can provide attractive commercials whilst giving robust compliance and risk management for you, your customers and your brand. Get in touch today.

Compliance and Governance