In a report published today, the FCA set out issues with information sharing between insurers and brokers, and in identifying target markets. Here’s the word;
Matt Brewis, Director of Insurance at the FCA, said:
‘Insurers need to make sure their customers are getting fair value. Progress is being made, but we are still seeing too many examples of insurers and brokers lacking the right information, governance, or oversight to ensure their customers get consistently good outcomes. All insurance firms should take note of our findings and make improvements where appropriate. We’ll continue to take action where we see poor value so consumers can have confidence when buying insurance products.’
In February, the FCA agreed a pause in the sale of guaranteed asset protection (GAP) insurance with a number firms, following concerns the products were not offering fair value.
In May, it was confirmed that the FCA permitted several GAP insurers to recommence sales following changes to their products.
The regulator has today also published its latest Value Measures Data (January – December 2023).
It has warned insurers that if they cannot demonstrate that their products meet FCA rules and provide fair value, it will take appropriate regulatory action.
INDUSTRY COMMENT
Deborah Bale, Head of General Insurance & Broking at NTT DATA UK&I, said: “There’s no magic bullet. Insurers need to shift from a transactional to a relationship-driven approach, but that takes time, and the statistics speak volumes. Our research shows that 82% of consumers noticed no change in how their insurers interacted with them since Consumer Duty came into force, and only 28% of customers took out new policies in the previous six months. Neurodivergent individuals are disproportionately impacted, with 29% struggling to understand their policies, compared to 18% of their neurotypical counterparts.
“This lukewarm sentiment should set off some alarm bells, but it’s no cause for panic. To rebuild trust, personalisation through AI is going to be key, such as using AI-driven chatbots for real-time policy guidance or predictive analytics to tailor coverage options based on individual customer behaviour. The future belongs to firms who can deliver personalised, authentic interactions that resonate with today’s digital-savvy, and increasingly sceptical, customer base.”
CAPCO
Matt Hutchins, Global Head of Insurance at Capco, comments on the FCA’s report on governance and oversight of insurance products:
“For insurers to consistently provide fair value to customers, they must consider more than the specific point in time when a product review is conducted. They should develop and monitor data points so that they can track whether customers are consistently achieving the good outcomes that insurers expect. Insurers should use a range of data points, such as claims rates or product usage (and cost), rejected claims rates (along with the reasons for rejections), customer journey drop-off rates, and customer sentiment analysis. These data points should ultimately demonstrate that customers are receiving the level of service they expect and that the product’s pricing remains consistent with the initial analysis used to determine its fair value, as well as its alignment with the associated costs and risks.
Insurer governance and accountability
“The nature of insurance products often leads to scenarios where third parties are used to either manufacture or distribute products. As a consequence, it is essential that firms define the accountabilities and responsibilities throughout the entire product lifecycle and across the distribution chain. A priority for insurers should be to ensure that key data points are being provided from third parties and are of sufficient quality to enable decision making. Equally, it is just as important for firms to be open to sharing information that is required by third parties to enable assessments of good customer outcomes. The governance and oversight of these metrics and the ongoing monitoring should now be embedded into business-as-usual processes and forums to enable the identification of any potential areas of concern and drive any required action.”
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