In a report published on Wednesday, the regulator argued that many providers are falling short when it comes to proving that they're providing 'fair value' to their customers. It also released new data showing how often insurers pay claims and how many claimants complain.
We've dug through the detail to explain the three key things you need to know about its findings, what they may mean for you and how you can help us to bring the industry to account.
1. Insurance firms are failing to get their heads around 'fair value' rules
In January 2021, the FCA introduced rules requiring insurers to ensure their products provide 'fair value' – in other words, whether customers are paying prices that are reasonable when compared to their levels of risk and the costs of providing the cover.
Firms are required to submit regular claims statistics to the regulator, while also carrying out ongoing 'fair value assessments' of the design and delivery of their products. Under the rules, firms should be able to readily give evidence demonstrating that their customers get fair value.
As part of a review, the FCA has now analysed information from 28 insurers and 39 distributors (firms that sell insurance – including intermediaries, such as brokers) to examine how well they're following its standards and if they've taken effective action where products have been found not to offer good value for money.
The watchdog hasn't liked what it's seen, concluding that:
Premium finance
One of a number of areas in which distributors fell under fire is in failing to consider the impact of interest payments for customers who pay monthly – known as 'premium finance' – when evaluating value for money.
The report says 'most firms...where the distribution strategy involves offering – or arranging to offer – retail premium finance, failed to take into account the costs of this finance.'
Find out more:2. Claims handling has worsened with most kinds of insurance
Alongside its report, the FCA published new statistics detailing how claims were handled in 2023.
3. What the FCA is doing
Matt Brewis, Director of Insurance at the FCA, commented that while progress is being made, 'we are still seeing too many examples of insurers and brokers lacking the right information, governance or oversight to ensure their customers get consistently good outcomes.'
Speaking of the FCA's new report, he's urged insurance firms to 'take note of our findings and make improvements, where appropriate,' adding 'we'll continue to take action where we see poor value, so consumers can have confidence when buying insurance products.'
Is the FCA doing enough?
Its latest review joins these in highlighting significant, widespread problems. In this third report, the FCA notes it's currently providing feedback to firms, and writes 'We are currently considering the most appropriate supervisory and regulatory actions we can take to urgently address these issues.'
But after three reports, it has yet to announce enforcement action against any of the firms found to be failing to meet requirements. We think the FCA needs to get tough with poorly behaving companies. That's why we've launched a campaign calling for an end to the insurance rip-off.
''We've found some insurers have made the claims process a nightmare for consumers, from customers feeling harassed for difficult-to-obtain information about seriously ill family members to claimants living in mould-ridden houses for months as their claim dragged on.
'A number of car and home insurers continue to charge customers who can't afford to pay for cover in one go, annually, excessive levels of interest, which could end up adding hundreds of pounds to the final bill. The regulator has long acknowledged that this is a "tax on being poor" and must urgently publish an action plan to set out how it will force firms that do this to stop it and give consumers fair value.
'Good standards of customer service didn't begin with the Consumer Duty. Insurers have been bound to regulatory requirements for years. If the Consumer Duty is to be worth the paper it's written on, the FCA must be prepared to take tough and decisive action against firms that fall short across the industry.'
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source https://www.which.co.uk/news/article/3-things-to-know-about-the-fcas-latest-review-of-insurers-ajeM85K8tHtI