The term ‘value measures data’ will already be familiar to a number of risk managers and
compliance professionals within general insurance – however regulations are changing, with the FCA planning to introduce new reporting requirements on claims performance across many personal lines markets having recently launched a consultation on the topic.
‘Value measures data’ refers to a range of claims performance factors and general insurers will be required to report details annually on factors such as the percentage of claims they pay, also called the acceptance rate, the average amount they pay out and what complaints have generated as a result of claims.
Building on previous work
This is not a new area for the FCA – it began work several years ago with a discussion paper in 2015 and has since run pilots in the home insurance market. The regulator has also focused on ‘add-on’ products, such as home emergency, personal accident and key cover, which have been an area of concern over whether these are bought with sufficient knowledge in addition to their cost and perceived low pay-out rates.
A broader approach
The introductory work was hailed as a success and the consultation focuses on encompassing more products. It will also include the additional metric of claims complaints. Reporting is expected to apply to a range of personal lines sectors including motor, travel, pet, identity theft and private medical and dental.
The new reporting should be at a “more granular level’ according to the regulator and insurers will also be required to spilt the data by sales channel. Notably, it will only be applicable if the insurer has a reasonably-sized market presence – there need to be premiums above £400,000 and more than 3,000 policies sold in the reporting year.
Benefits for consumers
The key aim is to help consumers understand more about products and to decide which insurers they should buy from. The FCA has said repeatedly that it wants to improve market transparency and competition. Bringing this data out into the open is expected to encourage firms to make product improvements.
Once received, the FCA will collate and publish the data in a format which it says will be easily accessible and comparable which can also be reproduced elsewhere, such as on price comparison sites. Insurance is all too often bought on price, with there being no commonly available data on which insurers provide real value for money – namely those that pay a high percentage of claims and of the correct value.
The outcome for insurers
This is an important new development for the personal lines market and in particular, insurers should be aware that it will be an additional supervisory tool for the regulator.
Indeed, alongside the new reporting and publication scheme, the FCA also said it intends to set ‘additional product governance rules’ – and details of these will be keenly awaited. So, there is going to be additional work for insurers in both providing the data and in ongoing monitoring. If there are seen to be few claims for a particular product and it is also resulting in higher than expected results, then it will be seen as offering poor value and insurers will be expected to take action and make changes.
“Our proposals are aimed at addressing poor product value and quality, and reducing the risk of unsuitable GI products being bought or sold.” the FCA said.
The consultation closes on 30 April and the regulator is expected to produce findings this
summer – now is the time to be making the necessary preparations.