Aug 21 – Don’t judge a book by its cover

Back in June I wrote about the FCA’s GI pricing practices Policy Statement. It appears that the enhanced rules and guidance on product value, which apply more widely than GI to include pure protection products, may have come in under many firms radar.

It’s easy to see why. The FCA has not done itself any favours by titling a Policy Statement ‘GI pricing practices’ yet included changes that impact a much wider market and aren’t related to price walking (the one area that took all the headlines).

Mortgage intermediaries that distribute pure protection products such as term life insurance, critical illness, income protection and/or GI are likely to be impacted by these changes in some way.

One of the new requirements on manufacturers is to ensure that its distribution arrangement avoids or minimises the risk of negatively impacting the fair value of their insurance products.

We expect there to be an increase in the amount of information requested and shared between distributors and manufacturers. Where not held already, manufacturers will be required to obtain at a minimum the type and amount of remuneration received by the distributor (including fees paid directly by the customer) and an explanation of the services they provide, as well as confirmation that their remuneration is consistent with their regulatory obligations.

AMI is engaging with the ABI to understand how insurance providers are interpreting and applying the rules and to ensure a pragmatic approach that avoids mortgage intermediary firms being inundated with information requests.

Whilst AMI members can access information on this via our GI pricing practices factsheet, we have published this article as it is important that all in the industry understand more about the changes and likely implications.

Stacy Reeve

AMI Senior Policy Advisor, August 2021