The British Insurance Brokers’ Association (BIBA) is calling on the Financial Conduct Authority (FCA) to reform its Consumer Duty product value/fair value assessment regime due to an “unnecessary” burden on broker productivity.
The plea features in BIBA’s 2025 manifesto which launched yesterday at the House of Commons.
In it the broker body also calls for insurers to make sure their pricing of products sold via brokers represent fair value in comparison to products offered direct to customers or via price comparison websites, a BIBA commitment to working with the government and the FCA to raise awareness of the benefits of the commission model and preserve this system due to its value to customers and a plea to government for the rate of insurance premium tax (IPT) to be cut from 12% to 10%.
Six point plan
The manifesto sees BIBA set out a new six point plan to achieve a more “proportionate” regulatory environment.
The plan calls for the removal of unnecessary FCA rules now the Consumer Duty is in place, reform of the product value/fair value assessment requirements, reducing the scope of the Consumer Duty by removing larger commercial clients, streamlining reporting requirements, speeding up authorisations and the need for international comparison metrics for the regulator.
Fair value assessments
In particular BIBA is calling on the FCA to reform the product value/fair value assessment regime.
While it highlighted the FCA’s introduction of examples of good and poor practice in their thematic review findings, it added examples for the range of different sized firms across the sector would be welcome.
BIBA maintained that the way firms are interpreting the current product value and fair value assessment requirements that apply to insurers and intermediaries involves “unnecessary” duplication, is resource heavy and embodies an ‘unintended’ burden on its members.
It pointed out typical insurance broker that might distribute 20 products from 50 insurers is expected to complete 1,000 fair value assessments which equates to thousands of hours spent by insurance brokers.
According to BIBA, despite the positive intentions that the regulator began with, its execution has created a “unreasonable” burden affecting broker productivity.
Fair value
Continuing with the topic of fair value, BIBA said while it is important for a broker to evidence that the advice and services that encompass the insurance purchase represent value for money, it is also vital that insurers ensure fair value and consistency in the provision and pricing of their products through each of their distribution channels, reflecting the costs of each and differences in the extent of policy cover offered.
It added insurance brokers bring an enormous amount of value to insurers and pick up most of the costs of the distribution, offering insurers a regional network, sector expertise, client screening, claims support, administration and document fulfilment, marketing resource and local knowledge.
Consequently, BIBA calls for insurers to ensure their pricing of products sold via brokers represent fair value in comparison to products offered direct to customers or via price comparison websites.
Commission
Turning to commissions, BIBA revealed it was committing to working with the government and the FCA to raise awareness of the benefits of the commission model and preserve this system due to its value to customers.
It warned any moves to force insurance brokers to a fee model may drive advice out of the market, as happened in the financial advice sector, adding: “Brokers are committed to following fair values as required by the FCA to ensure that their commission earnings reflect the work they do plus a reasonable margin to allow them to grow in their business.”
IPT
Finally BIBA called on government to reduce the cost of insurance for all by cutting the rate of IPT from 12% to 10%, pointing to WPI Economics 2024 research indicating six in 10 households see IPT as a tax on working people.
Golden opportunity
Graeme Trudgill, CEO at BIBA, said: “We have a golden opportunity with the Secondary International Competitiveness and Growth Objective (SICGO) on the regulator to align with the government’s focus on growth.
“Improvements to the regulatory architecture can reduce the burden on firms and achieve a regulatory approach that supports growth.
“We know that our issues and the importance of insurance brokers have been recognised by government with financial services being one of the eight priorities in its new industrial strategy.
“We have enjoyed an extensive collaborative approach with the regulator during the last year and there is an opportunity to achieve positive outcomes.
“Partnership both within and outside of the industry is key to this year’s manifesto in helping us achieve improved outcomes on the issues raised for everyone.
“The value that brokers provide to clients is so important and this is recognised through the amount of support we’ve received for what we’re doing.
“We’ve really plugged in with the decision makers on these issues; you can see the senior level of support throughout the manifesto.”
Emma Reynolds MP, economic secretary to the Treasury, added: “The financial services sector, including insurance broking, plays a vital role in driving growth across the UK economy.
“This is why the government has named financial services as one of our eight priority sectors within our industrial strategy.
“I look forward to working with BIBA, its members, and the entire broking sector, to support a thriving and competitive insurance market across the UK that delivers for both businesses and consumers.”