The FCA certainly seems intent on keeping up levels of activity in the general insurance market, with a range of regulatory developments and proposals - whether it's changes to the sale of add-ons, proposed changes in the way renewal information is communicated or the latest proposals for testing value measures for general insurance products. Not to mention the Insurance Act 2015...
So, what’s on the table at the moment?
In its Feedback Statement published on 1st March this year, the FCA summarises the responses it has received to the options it set out in its June 2015 Discussion Paper on general insurance add-ons and outlines its next steps.
Having considered the feedback to its original Discussion Paper, the FCA has decided to take forward a scorecard as its preferred option for presenting measures of value. The scorecard will include claims frequencies, claims acceptance rates and average claims payouts, potentially with the inclusion of an average premium metric.
Rather than point-of-sale disclosure to consumers, the Regulator still prefers publication as a market transparency remedy. The FCA considers the scorecard could give users a wider breadth of information about GI products sold to consumers, while reducing some of the risks and costs associated with the claims ratio.
The Insurance Act 2015 (the Act) is the result of a joint review by the Law Commission and Scottish Law Commission into insurance law. It introduced substantial changes to the laws governing disclosure in non-consumer insurance contracts; warranties and other contractual terms; and insurers’ remedies for fraudulent claims for both consumer and non-consumer contracts. These will come fully into force on 12 August 2016.
The Insurance Act 2015 impacts largely on commercial insurance contracts and the relationship between brokers and their commercial clients; it follows on from the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA).
Whereas CIDRA covered consumer insurance contracts, the Insurance Act 2015 (the Act) impacts mainly on commercial insurance contracts although there are some sections which do apply to both types of customer.
In early December 2015, following concerns that consumers do not adequately consider their options at policy renewal, the FCA published Consultation Paper CP15/41 (Increasing transparency and engagement at renewal in general insurance markets).The CP sets out proposed new rules and guidance relating to the renewal process for all general insurance products purchased by consumers (retail customers). The proposed requirements will apply to the firm (insurer or intermediary) which provides the renewal communications to the customer.
This is a detailed consultation paper, likely to impact the majority of firms, with proposals ranging from additional mandatory disclosures to guidance on record keeping requirements.
Following its market study into the sale of add-ons in 2014, the FCA found that competition was not effective or working in the best interests of customers. Four remedies were proposed to address this:
In its Policy Statement PS 15/22, the FCA is now implementing proposals 3 and 4. Its ban on opt-out selling of add-ons should come as no surprise, given the Regulator’s rhetoric on this issue. However, what may come as a surprise is that the FCA has now confirmed that optional extras (such as accidental damage on household policies) come within the definition of an add-on.
1st April 2016
As you can tell, there's a lot going on and in a changing environment it pays to have the right advice and support. Call us; we can help guide you through the changes, understand the implications for your business and keep you up to date.