The UK’s Financial Conduct Authority (FCA) has raised concerns about the value motor, home and other insurers offer their customers. Despite the introduction of tougher protections for policyholders in July 2023, the watchdog found that many insurers have failed to demonstrate that they deliver good outcomes for consumers.
A thematic review led by the FCA has highlighted problems with governance, supervision and product control in the non-life insurance sector, which can lead to poor customer value and potential harm.
The study found that many insurers do not have effective frameworks in place to demonstrate the value offered to their customers. Nor is enough consideration given to the overall price of a policy, including how compensation affects the overall value of the product.
Matt Brewis, director of insurance at the FCA, said: “Progress is being made, but we still see too many examples of insurers and brokers not having the right information, management or monitoring to guarantee their clients consistently satisfactory outcomes.
The FCA’s consumer protection duty, established in July 2023, aims to protect consumers across the financial sector from the mis-selling scandals that have affected the industry for years. As part of its ongoing efforts to ensure that consumers are treated fairly, the FCA has published its latest indicators to assess the value of insurance products. These indicators include the proportion of premiums paid in the event of damage.
The FCA’s findings show a variation in claims costs compared to premiums, with 72% for health insurance plans, 56% for car insurance and 45% for home insurance. The share drops significantly for various complementary insurance products.
The FCA warned that it would contact companies later this year to look more closely at their products and the steps they have taken to improve their value. In addition, the authority clarified that it will intervene if necessary to protect consumers, especially if a company fails to improve the value of its underperforming products.
Reuters contributed to this article.
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