Context
The FCA has published a web page regarding insights from the first year of the implementation of the price and value outcome, which is intended to help firms improve the way they think about fair value assessments. For the general insurance sector, this guidance needs to be viewed in the context of the recent findings published by the FCA and can perhaps give little more than general guidance about the price and value outcome.
Key points to note and next actions
- As something of a ‘first’ in recent FCA findings reporting, the FCA has separately highlighted throughout this publication how small firms might take a reasonable approach to the requirements of the price and value outcome.
- The FCA will be looking into how firms are assessing whether they are providing fair value for consumers, how firms are using fair value assessments as part of their efforts to deliver good outcomes, and examples of good and poor practice for firms to consider and incorporate into their approach, particularly when producing fair value assessments.
- Regarding smaller firms’ Fair Value Assessment, the FCA does not expect a small firm to apply the same resources or processes to assessing fair value as a large firm. What is expected is that firms should take a reasonable and proportionate approach in light of their resources, size of client base, and the complexity of the factors being considered in the fair value assessment.
- The FCA has longstanding concerns regarding Guaranteed Asset Protection (GAP) Insurance and its value and effective competition. Following the FCAs general insurance value measures data in 2022 and 2023, the data indicated that GAP insurance may not be providing fair value to customers. The FCA has been imposing requirements on firms to suspend the sale of GAP insurance, asking that they improve their fair value assessments. The FCA has recently lifted several of the requirements as firms addressed the FCA’s concerns. The remaining firms’ fair value assessments are still being reviewed.