Context
The FCA has published the annual Value Measures data for the calendar year 2023. In introducing the publication, the FCA has reminded firms that it wrote to manufacturers of GAP insurance in 2023 in relation to concerns over value. The FCA also wrote to retail and wholesale insurance firms in September 2023, when the value measures data for 2022 was published, setting out its priorities, which included a focus on price and value.
Key points to note and next actions
The latest data continues to highlight some products that do not appear to be delivering fair value as required by PROD 4 and the Consumer Duty. Many factors can contribute to the value of a general insurance product, so it is important to consider all these factors together rather than single metrics in isolation. Some of these factors are included in the published data and some are not identifiable.
At an aggregated product level, where a minimum of 5 firms reported data, and the data met the standards required for publication:
- Claims costs as a proportion of premium range from 10% for GAP insurance (Add-on) to 72% for healthcare cash plan (All).
- There has been modest improvement among some of the products with the lowest proportion of claims costs to premiums written. However, they remain low relative to other insurance products.
- Claims costs as a proportion of premium were 56% for motor insurance and 45% for home insurance (buildings and contents combined). This is a drop compared to 2022 (when they were 64% and 50% respectively).
In its web page announcing the value measures data publication, commentary in relation to demonstrating value covers assessing value, differential outcomes and contextual factors.
Under the heading ‘Action for firms’, the FCA expresses concern that a number of firms appear to be reporting data that could suggest a large difference between the risk price and the total price paid by the customer. This may present similar risks of harm as those the FCA identified in the GAP insurance market. The FCA has reminded firms that they must be fully compliant with PROD 4 rules.