The Financial Conduct Authority (FCA) has identified personal accident cover as potentially providing “poor value”.
The regulator said concerns had been raised about the product’s value through the findings of its initial value measures reporting.
It also repeated the need for insurers and advisers to be able to justify how much of a customer’s premium went on commission or other distribution costs.
‘Products raising big questions’
The measures reporting is part of the FCA’s monitoring of its fair value product rules for general insurance (GI) and pure protection which came into force a year ago.
FCA head of insurance market analysis and policy Daniel Hurl said the regulator would be publishing the findings, but initial work had found there were some areas of concern.
Hurl noted there were “clearly some products that are raising some big questions” and the FCA expected to look at these firms individually and across the market more widely.
“This report does reveal there is potential poor value in certain retail GI products, including but not limited to guaranteed asset protection insurance and personal accident insurance,” he said.
“We’ll be saying more on this and our expectations in November and therefore there will be continued focus on board and management oversight of fair value, particularly in the context of cost of living pressures.”
“We want products to be sold that have customers at the heart of them.”
How much premium to distribution?
Speaking on the FCA’s Consumer Duty webinar, Hurl highlighted some of the key questions the regulator expects insurers to be asking are:
- does the product have a defined market?
- does the cost of the product reflect the cost of risk?
- how much of the premium is used to pay claims and how much of that premium is paid away into the distribution chain?
Hurl also spoke to the life insurance sector for products that are not currently covered by FCA product rules.
“We’ll be looking for firms to ensure there’s fair value and renewed focus [that] builds on our previous guidance on the treatment of long-standing customers,” he added.