Aviva has not removed any intermediaries from its panel over the use of loaded premiums but has told firms to bring metrics around these premiums “back into line”, the insurer has told Health & Protection.
Fran Bruce, managing director of protection at Aviva (pictured), added that the insurer is working closely with its distribution partners in order to evidence that any use of loaded premiums is appropriate and fair and has introduced metrics to measure this.
Speaking exclusively to Health & Protection, Bruce said Aviva understood the Financial Conduct Authority’s (FCA) aims with its new Consumer Duty rules.
“We’re really supportive of what the FCA is doing in terms of the Consumer Duty and really trying to raise the bar around protecting against any potential customer harms across the distribution chain and wanting to get good outcomes,” Bruce said.
“So we’re really of supportive of where they are trying to get to.
“We have really robust controls, as you would expect, around a lot of this and policies where we think there is potential harm, and obviously we are going through the process at the moment of making sure that we are reassessing any of those in light of the Consumer Duty.”
Onus on distributor and insurer
But Bruce confirmed that Aviva has not altered its use of loaded premiums at the moment, despite the issue being a hot topic in the sector.
Last year, the Financial Conduct Authority (FCA) confirmed its Consumer Duty does not explicitly prohibit the controversial practice of loaded premiums where premium rates are inflated to pay distributors and advisers higher commission.
Following this confirmation Tony Müdd, divisional director of St James’s Place, argued that while the Consumer Duty may have not explicitly banned loaded premiums, it may as well have done.
“What I would I say is that some of our panel positions do have loaded premiums,” Bruce continued.
“We’ve not taken any decisions to make any changes to those at this point.
“What we are doing is working really closely with our distribution partners so we can make sure that we can evidence the value the customer gets through the distribution chain is fair and gives a good customer outcome.
“And the onus is on both the distributor and us to be able to evidence that.”
Bruce added that Aviva was working “really well” with all its partners on this “to make sure that we have got a good story and that it’s appropriate”.
Fair value metrics
And she revealed the insurer has installed customer fair value metrics across its pricing framework which has led to telling intermediaries to revise their commission.
“We look at it all of the time, every pricing decision, every new deal or panel decision we consider customer fair value metrics,” Bruce said.
“And to the extent that they then start to drift into territory that we think is now potentially unfair, that’s where we work with the distribution partners to bring them back into the range of which we think is fair.
“So we’ve got active conversations with some of our partners bringing those metrics back into line. So it’s just a core part of what we do.
“It’s not something that’s brand new as part of the Consumer Duty for us, but raising the bar around the evidencing of it is what we’re working on,” she concluded.