Context
Matt Brewis, FCA Director of Insurance, was one of the speakers at Westminster Business Forum conference on Next Steps for UK Insurance Regulation. His speech was entitled “Regulatory Priorities in the Wake of Covid-19”
Key points to note
The introduction was that firms need to put customers at the centre of their business and treat them fairly. Post pandemic what can consumers afford, and do they now want different products given their experiences during the pandemic?
His three main topics were Value, Vulnerable Customers and Consumer Duty.
Value
- The point was made that, unlike for some sectors, value was not a new concept in insurance, and it had been around for several years (with requirements in the IDD), thematic work by the FCA and where we are now with what is in the Pricing Practices Rules.
- Given the title of his speech he made references to Covid-19 exclusions, such as in travel. His point was not that there should not be exclusions, but that it should be clear to the customer what is covered and what is not covered, and whether the product meets the customer’s Demands and Needs.
- He said value is not just about cost, and that some customers may be willing to pay for extra services such as an around the clock call centre for emergencies in travel insurance or having a courtesy car as part of a motor insurance policy.
- However, he did say that cost is the main thing, especially given the cost-of-living crisis. Customers should expect fair value and if only a small percentage of the premium is used to pay claims, then is this fair value? This metric in isolation ignores, of course, the cost of distribution.
- Related to the cost-of-living crisis, people may reduce cover or not insure at all (see the FCA’s published guidance on dealing with customers in financial difficulty)
Consumer Duty
- Mr Brewis described this as the “umbrella”, being the main driver covering future regulation. Again, he commented that because of the above value work the insurance sector was ahead of other sectors on this.
- Welcomingly, he also said that they would be publishing a report giving more examples of how to determine value of insurance products based on what the FCA had already seen.
- In response to a subsequent question on should more be done to help vulnerable customers when they have a claim, Mr Brewis referred to the Consumer Duty saying it has more focus on this.
Vulnerable Customers
- The vulnerability theme was woven throughout the speech, into the two topics above.
He then moved onto some specific areas:
Cladding / High Rise Buildings – see our above item in relation to multi-occupancy building insurance.
Pricing Practices – the FCA is collecting data on how the market has changed to erode the loyalty penalty and it will publish its findings in the next few months. A subsequent speaker, James Daley, Managing Director of Fairer Finance, was critical of the pricing practices rules believing that they have put up the prices for everyone.
Contract Certainty
- This was in relation to the Business Interruption Test Case on Covid-19 claims where Mr Brewis said £1.4bn in claims had now been paid out.
- A learning point was that it showed a lack of clarity in policy wordings and that small changes in words in sentences can have a big impact. Firms did not really know what they had written and that they had these differences in their wordings. As a result, Mr Brewis feels that there will be fewer policy variations going forward with more SME policies being “off the shelf”.
- The challenge is how to make insurance policies clearer.
Next actions
None – for information and awareness