Best’s News & Research Service - June 25, 2015 02:24 PM (EDT)
UK Regulator Presses Nonlife Insurers to Improve Product Information
LONDON //BestWire// - In what it called an effort "to improve transparency and increase value" across the U.K. nonlife insurance sector, the U.K. Financial Conduct Authority is pressing insurers to provide better information to customers.
The insurers, the regulator suggested in a discussion paper, might focus on increasing disclosure in three claims areas: ratios, frequencies and acceptance rates. Insurers have been asked to respond by Sept. 24.
The FCA said it is "inviting industry to put forward ideas for remedies that will give consumers an indication of the value of general [nonlife] insurance products," the regulator said in a statement.
The FCA said it took its initiative in response to "concerns about poor value and a lack of effective competition in general insurance markets."
The regulator said its action follows the market study it released in July 2014 on nonlife add-on products. That study found many customers "were paying too much for some products that offered poor value."
That market study also led to the announcement by the FCA in June 2015 of restrictions of the sale of add-on insurance products in the motor vehicle sector. As of Sept. 15, businesses that sell what is known as guaranteed asset protection insurance will have to make it easier for customers to shop around.
Under the new FCA rules, a business offering a GAP policy as part of the sale of a motor vehicle, for instance, will be required to provide shop-around information, and be prohibited from selling the add-on policy on the same day as the sale of the vehicle. In a policy statement, the FCA said the rules are intended to "limit the point-of-sale advantage of add-on distributors" (Best's News Service, June 10, 2015).
Christopher Woolard, the FCA's director of strategy and competition, said the regulator believes its latest proposals will encourage firms "to offer the best deal for consumers."
"We are committed to introducing a measure of value for general insurance products," Woolard said in a statement. "We believe consumers in this market need to have greater transparency about what they are paying for."
In a separate discussion paper, the FCA exhorted financial services firms to improve the standard of their communications with customers. The regulator said it aimed that discussion paper, Smarter Consumer Communications, at "firms, consumer groups, and stakeholders."
Woolard said communications from firms to customers are often so technical as to baffle "even the most astute consumer."
"A well-functioning market needs informed and engaged consumers," Woolard wrote in a foreword to the document. "It requires consumers to have access to high-quality, appropriate information to help them understand the product or service they have or plan to buy."
(By Robert O'Connor, London editor: Robert.OConnor@ambest.com)