Briefing: FCA’s thematic review demands greater disclosure from industry

By Stuart Reid

As much as I try, I cannot start this month’s article without again mentioning the ongoing issue of claims service – or more accurately, the lack of it – across our industry.

I receive many reports both inside and outside of our industry which state that we are still falling woefully short in this area – from inexcusable delays and depleted teams due to holidays or overwork, to fundamentally inexperienced staff with little or no understanding of the cover about which they opine.

While we have recently debated whether or not claims are the ‘shop window’ of any supplier, they are certainly the ultimate proof and value of any insurance product sold.

Get claims wrong and you undermine the very reason we are all here in the first place. This is why it is so annoying that we seem to be continually falling short.

It is also significant to note that we are now at a stage where the regulator is reporting how disappointed it is that the insurance industry is failing to provide evidence of fair value to customers or that customers are, in fact, receiving good outcomes at all.

And while it is understandable that much of the public debate on this criticism is centred around earnings, commissions and the like, surely the best ‘good outcome’ measure is when the product is actually called upon to act and a claim is made.

The FCA’s opinion

In August 2024, the FCA published its latest thematic review, entitled Product Oversight and Governance Thematic Review for General Insurance and Pure Protection – this does not make for a relaxed read.

Claims is specifically mentioned in the report 18 times.

When the FCA discusses what information should be used to assess value, it again reinforces the importance of claims, stating that “…claims data – including handling times, frequency, severity, ratios, acceptance/decline rates – and complaints data – including root cause analysis and handling times – should be used”.

If what many of us are hearing about claims service is true, then the results of this reporting will be a bleak picture.

The FCA’s report goes much further than a simple reminder of what is legally required, however.

While most of the heat is very much directed at manufacturers, distributors cannot abdicate their responsibility by simply pointing the finger. They need to gain information from manufacturers after all.

However, distributors have more to worry about and have provided the most column inches since the report’s release.

Most “do not fully understand their responsibilities to consider their remuneration, its interaction with the services and benefits they provide and its impact on the products value”, the FCA wrote. “These failings have/can lead to harm”.

Damning as that is, the FCA also mentioned that only a few distributors have so far “provided adequate evidence that they had appropriately assessed whether the remuneration was consistent with the product providing fair value”.

More work to do

The FCA has called on the insurance industry to urgently consider the findings of its report.

As a sector, we now need to assess to what extent the issues outlined apply to activities undertaken by our organisations. Many, therefore, will return from their summer holidays and will need to face these issues head on and quickly.

It certainly looks like the FCA will not be hanging around – plans for further action were hinted at within the report, such as potential timelines to review governance specifically, further withdrawals of products from the market and to conduct “skilled person reviews”.

It is clear that the FCA is vexed at the lack of information provided by the industry – it is therefore seeking to be on the front foot in its desire to get what it wants and it is looking at various ways to do this quickly.

To those that did get away over August, I hope the holidays provided a good rest. It is obvious the regulator feels that much work remains to be done upon your return.