Insurance Times survey reveals consumer support for FCA proposals on new metrics

When it comes to personal lines, the FCA has made it’s view perfectly clear that things need to change.

Be it through the enforcement of transparency regulations at renewal, or through the wide-ranging fair pricing study, action is starting to be taken with what could be far-reaching implications for the market.

The latest FCA proposals centre around increasing the scope of reporting requirements on value for money metrics. A consultation is being held on enforcing insurers to publicly report data on 33 different personal lines products – publishing claims acceptance, claims frequency, average pay-out and customer complaints.

It’s due to cost the industry £11.7m in its first year, followed by an annual cost of between £1m and £1.4m, and already the ABI has warned that any new regulatory requirements must be careful to “provide genuinely useful information.”

But a Consumer Intellligence survey of 1,082 UK insurance-buying adults, commissioned by Insurance Times, suggests there is a demand for this information.

When asked if it would be useful to know the proportion of claims the insurance brand you’re buying from has accepted or rejected, 71% said it would, and 52% said there is not currently enough information to work out if you are getting value for money.

In order to be net beneficial, the FCA has reported in its cost benefit analysis that the new regulations would have to generate £2m-£2.8m of savings for consumers per year.

With over half believing they don’t know if they are getting value for money, and the appetite being there to discover this knowledge, it suggests such a saving could be achieved.

But to generate the consumer savings on products they are currently getting poor value from, customer engagement will be key.

This is the the ABI’s director of general insurance policy, James Dalton’s, view.

Dalton added: “We all know that too much information does not increase customer engagement with the products they buy, so it will be important to ensure that any new data requirements provide genuinely useful information that actually adds real value and improves customer outcomes.”

Media

The FCA states it sees the media and consumer organisations playing a part in informing customers of this information.

And with 71% saying negative media coverage of an insurer’s claims acceptance rate would put them off buying from that insurer, it should mean any poorly performing insurer will have every incentitive to improve.

The survey found 53% of people believe insurers try to avoid paying legitimate claims, and Consumer Intelligence chief executive Ian Hughes suggested adopting the FCA’s proposals could increase consumer trust in the insurance industry.

He said: “These results show there is unwarranted cynicism and mistrust from consumer media which seems to overstate the issue by looking at the small numbers of occasions that things go wrong but fails to acknowledge that things mostly end well. The publication of empirical claims data could help to counter the inflamed anecdotes of rejected claims in the media.”

The survey also found 89% believe it is acceptable for insurers to reject up to 5% of claims. The FCA’s pilot on home claims earlier this year showed that only nine out of 29 firms met or exceeded this expectation, suggesting insurers would have to work on improving their claims service.

But Hughes said this was only a good thing. “Transparency over claims data could also help insurers justify further investment in their claims service as it would strengthen the link between claims and customer retention and acquisition,” Hughes added.

While brokers look to be largely outside the scope of these new proposals – only being burdened with reporting data in the case there is no authorised provider – such a flurry of new metric data could be a cause for concern.

Chiefly brokers have expressed worry that making the data public could de-value the expertise the broker brings.

“Currently the broker has all that information, which they would know just by dealing on a day-to-day basis with insurers,” said David McGowen, director of Ipswich-based broker Woodward Markwell.

“That would be the expertise that I have, so that I can give that kind of advice. If that information was publicly available it might take away some of the value that the broker brings.”

Opportunity

On the whole though, brokers, including McGowen, can see opportunity as well. McGowen says this is the kind of data that millennials would come to expect. Dealing with customers that understand these new metrics might make the job of explaining the different options to clients easier.

This is how the FCA sees brokers benefitting from the proposals.

Market participants, like brokers, are the main target of this information, according the FCA, as opposed to consumers.

“The value measures data is not targeted directly at consumers, but rather is a remedy to improve market transparency around product value and create incentives for firms to make value improvements,” a spokesperson for the FCA said.

Nevertheless, the information would be freely available through the FCA website.

The value for brokers may instead be found in paying closer attention to the particular customer.

This is according to Biba’s David Sparkes, head of compliance and training.

Sparkes said: “Brokers will understand that the data does not tell a client about the likelihood of an insurer paying a claim under the particular contract that the broker is recommending, as the data is aggregated and averaged.

“Clients are however, able to rely on their brokers expert knowledge of the market and the knowledge that the broker is acting in their best interests.”

Positive

Aviva’s head of intermediaries Phil Bayles said the proposals had to looked at as a whole package – and that on the whole they would have a positive impact on the market.

The proposals follow a 2014 study into the value of add-ons, and Bayles said the proposals would go a long way to eliminating these rarely claimed on products.

“By and large customers get very good value out of home and motor – that’s not necessarily the case for add-ons,” Bayles said.

“If action can be taken to stamp out these add-ons we might go back to a time when insurers had to make up their margin without add-ons.”

And Bayles expanded on how this could help to tackle issues around renewal pricing.

Bayles said: “There are a lot of issues in personal lines and they are all interlinked. Introducing transparency in terms of the value for money is one piece of the jigsaw.”

In most cases, brokers and insurers have long been aware of these issues in personal lines, and regulatory action is welcome.

Bayles says it is the accumulation of regulatory requirements which is why it is why the topic of regulation can cause alarm.

As the FCA looks to take action then, the market will be hoping for an all-encompassing solution that can neatly resolve several problems. Whether it works out this way remains to be seen, and dealing with regulatory concerns in personal lines may be something the market has to get used to.