The FCA issued a report on the distribution of insurance products from the General Insurers, via the MGA and broker networks. In particular the FCA looked at whether consumers were getting the right information, and fair value, from a system which has essentially evolved from old fashioned commissions and dusty leather-bound ledgers.
At the heart of the matter is fair pricing for all concerned, both customer and those companies involved in the insurance supplier chain. So what’s been the industry reaction?
Here’s some comment from regulatory and complaints handling experts, Huntswood,
Nikki Ceko, General Insurance Sector Lead, said: “Increased concern around firms’ use of unfair or differential pricing models, especially when dealing with vulnerable customers or those who are less able to shop around, means that insurance companies must start evaluating their pricing practices to ensure they are delivering good customer outcomes. Putting in place a robust strategy and strong product governance will underpin this, allowing firms to set fair prices for their target markets, while also remaining compliant.
“The FCA’s priorities for the next 12 months are geared towards firms adopting a culture that ensures the fair treatment of long standing customers and guarantees that vulnerable individuals in particular are treated fairly according to their individual circumstances.”
Meanwhile, here’s the word from BIBA:
There does not seem to be a problem across the whole industry. Looking at the examples in the FCA paper, the issues seem to be arising from the secondary sellers, the report provides examples including car showrooms, mobile phone sellers and tour operators.
We are pleased that the FCA highlights that it is important to note that there are also many other GI distribution chains and products delivering good value insurance products and appropriate outcomes, with no evidence of harm.
It is our strong view that as agent of the customer, insurance brokers have always acted in the best interests of their customers. Now with the Insurance Distribution Directive it should be the case that any distributor of insurance products must also act with the customers’ best interests.
We note that the FCA has raised concerns about evidence indicating that customers may be sold sub-standard or ‘hollowed out’ products. Our strong recommendation is that when a secondary seller is offering an insurance product that customers benefits from a second opinion by seeking the advice of an insurance broker who can advise on a range of products and prices to suit their needs.
You can access an insurance broker at www.biba.org.uk or 0370 950 1790
There are links to the various sections of the FCA report here. To be fair, the FCA admits in its own preamble that it looked at `travel, tradesperson and GAP motor finance insurance sales,’ but applied their findings right across the GI chain.
That’s a bit like investigating the distribution of jewellery and the profit margins on items at Warren James, Debenhams and Argos, and then deciding you understand how the entire UK jewellery and watch market works. You don’t.