The Financial Conduct Authority (FCA) has published value measures data for general insurance products including healthcare cash plans, mortgage payment protection insurance, and dental insurance.
According to the figures, cash plans and dental plans appear to be among the highest claim acceptance rates and the lowest complaints rates of all the 32 products sampled.
The FCA noted that general insurance was an important product for consumers “and by and large provides essential protection to consumers at fair value”.
However, it warned: “We are concerned about how the current picture presented in the data appears to compare with firms stating that virtually all products are providing fair value.”
Cross-product comparisons
Across all product categories, healthcare cash plans posted the highest claims frequency by far of 116.5%, while the lowest was for personal accident (add-on) insurance at 0.08%. Dental insurance was at 2.95%.
Cash plans also had the lowest complaints rate with complaints as a percentage of claims at 0.09%, while dental insurance was eighth in this category with a figure of 0.82%. The highest complaints figure was for home emergency (standalone cover) at 11.8%.
Both health cash plans and dental insurance accepted at least 93% of claims made.
The highest claims acceptance rate was for extended warranty – electrical goods (standalone) cover of 99.19%, while the lowest was before the event legal expenses – home cover of 56.0%.
Mortgage payment protection insurance providers posted claims frequency of 1.44%, a claims acceptance rate 91.68% and claims complaints as a percentage of claims of 6.74%.
Regulator expects action
The regulator highlighted that the value of insurance products for consumers continued to be an important area given cost of living increases and is a central feature of its incoming Consumer Duty.
“Firms must ensure that their products offer fair value to consumers and take the value measures data into account when assessing fair value,” the FCA said.
“Where value metrics indicate potentially poor value, we expect a firm’s board and senior management to strongly challenge whether its products are offering fair value to consumers.”
Those firms and products performing poorly will be under further scrutiny from the regulator.
“We will ask some of the firms offering potentially lower value products to consumers, according to the value measures data, to explain the value of these products and the outcome of the firms’ fair value assessments,” it added.
“General insurance is an important product for consumers and by and large provides essential protection to consumers at fair value,” it said.
“However, we are concerned about how the current picture presented in the data appears to compare with firms stating that virtually all products are providing fair value.”
Though this is the first set of data covering the period of July to December 2021, the FCA said it will continue to analyse trends over time.
Health cash plan providers
The vast majority of healthcare cashplan providers had a claims acceptance rate of over 90%, with the exceptions of Bupa and Sovereign Healthcare (both 85-90%).
On claims frequency, BHSF, Bupa, Health Shield, Medicash, Simplyhealth, Sovereign Healthcare and Westfield were all at 95-100%, while AIG was at 0-5% and Personal Assurance at 10-15%.
And on claims complaints as a percentage of claims, all providers were at 0-5%.
AIG posted the highest average claims payout value of between £2,000 and £2,500, while all other providers posted an average of below £500.
MPPI
Turning to mortgage payment protection insurance, on claims acceptance rate, five of the nine providers analysed in this category posted a rate above 90%.
Axa, Covea, Great Lakes and UK General Insurance posted a claims acceptance rate of 90% or below.
All providers were at 0-5% on claims frequency.
In terms of complaints as a percentage of claims, Assurant, Covea, Lloyds, St Andrew’s and UK Insurance were all at 0-5%, compared with Axa at 25-30%.
UK General Insurance posted the highest average value claims payout of between £8,000 and £8,500. The lowest average payout was by Pinnacle Insurance of between £1,500 to £2,000.
Dental insurance
Finally, among dental insurance providers, Bupa was the only provider to post a claims acceptance rate of 90% or below with all the others above 90%.
However Bupa also posted the highest claims frequency of 95-100% with Westfield posting the lowest of between 35% and 40%.
All providers in this category also posted claims complaints as a percentage of claims of under 5% and all posted an average claims payout of under £500.
Looking ahead, the regulator revealed it will be closely analysing the next data set due in February 2023, as well as testing the robustness of firms’ product oversight and governance arrangements, including fair value assessments.
Where the data indicates that individual firms, or products, are not providing fair value, the FCA added it was seeking to urgently understand their assessments and what, if any, changes have been made to the products as a result.
In the event the regulator is not satisfied with the explanation, it warned it will consider what tools it should use to protect consumers.
While this first dataset covers a six-month period, the FCA revealed future datasets will cover full year reporting periods to give a fuller picture of product value and also better reflect wider factors such as seasonality.