Context
As part of their work on General Insurance Pricing Practices the FCA published a Q&A document alongside the publication of PS 21/5. On 1st October 2021 the FCA updated the Q&A document. Further questions have been added at 1.16 to 1.22 in the first section of the document. The new questions are grouped under an introductory heading of “Further questions on incentives”.
Key points to note
- Most of these new Q&As are around the area of Price Comparison Websites (PCWs) and how incentives through PCWs and cashback sites are treated.
- In question 1.16 the FCA has clarified what constitutes undertaking Insurance Distribution activities at renewal, in particular the dealing in investments as agent activity. We suggest firms take note of this answer in particular as it provides some helpful clarification.
- Within the answer to question 1.21 the FCA has clarified that offering cash or cash-equivalent incentives is effectively the same as commission rebating and that firms which affect the end price paid by the customer only by means of such incentives or commission rebates do not have to report as a price setting intermediary. Instead for reporting purposes, any cash or cash-equivalent incentives offered will also form part of the notification where 25% of sales have commission rebating or discounting. This means those firms that offer incentives/rebate commission will have less reporting on the REP021 form but will have to monitor how much they do given the 25% notification requirement.
Next actions
As part of their ongoing work in relation to pricing practices we suggest firms read through the additional questions as they provide some useful clarifications in relation to the treatment of incentives. We will continue to publish any additional updates to the Q&As as and when they appear.