June 20 – Product value in insurance
On 3 June the FCA published guidance on the value of insurance products (GI and pure protection). The focus is on products which, due to coronavirus, may not be able to provide the expected contractual benefits or there is a fundamental change in risk and products are providing little or no utility to customers.
The guidance expects product manufacturers and providers to carry out product level assessments within the next six months, to ascertain whether there is anything that could materially affect the value of their products and to decide on resulting action. Although there are existing obligations on product governance, coronavirus should be a trigger for insurance firms to consider its effect on their products.
In response to the draft guidance, AMI sought clarity on the role of intermediaries in this process. The FCA has confirmed in their Feedback Statement (FS) that ‘[it] would not expect brokers to be conducting product assessments, unless they are the product manufacturer’. However, there is the expectation that the distribution chain will work together to ensure that customers are made aware of any changes at product level.
In the FS the FCA also refer to guidance on the GI distribution chain, which was published in November 2019. Firms distributing insurance products should consider revisiting this guidance. It is less likely that there will be a change to the value provided by insurance products sold by an intermediary in our sector compared to others such as travel; however intermediaries could see changes if some additional benefits on protection products, for example, cannot be digitalised.
The concept of value has grown in prominence within the regulator’s vocabulary in recent years – the word ‘value’ is mentioned 28 times alone in the FCA’s 2020/21 Business Plan. AMI expects to see a greater focus on this throughout 2020/21 as we navigate this crisis and beyond.
Senior Policy Adviser, AMI
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