General insurance value measures data - July to December 2021

We have looked at claims costs as a proportion of premium. At an aggregated product level (where a minimum of 5 firms reported data):

• Claims costs as a proportion of premium range from 5.21% for GAP Insurance (Add on) to 65.95% for Motorcycle (all).
• For some products, add-ons have on average lower claim costs as a proportion of premiums, compared to the corresponding standalone product.
• We note that products with the lowest % of premiums paid out in claims included GAP Insurance (Add-on and standalone), Travel insurance (various), Excess Protection Insurance (Add-on) and Personal Accident Insurance (Add-on).

Users of the data can filter the firm specific information by product to explore the distribution of value measures across different firms.

This is a first dataset, covering a 6-month period. Future datasets will cover 12-month reporting periods and give a fuller picture of product value, also better reflecting wider factors such as seasonality.

Download GI value measures July to December 2021 (XLSX)

View the GI values measures tables

Firms must ensure that their products offer fair value to consumers and take the value measures data into account when assessing fair value. Where value metrics indicate potentially poor value, we expect a firm’s Board and senior management to strongly challenge whether its products are offering fair value to consumers.

Firms must assess the value of their products, considering, among other things, the nature of the product, including the benefits that will be provided, their quality, and any limitations (for example in the scope of cover, exclusions, excesses, or other features). In our thematic review of the general insurance distribution chain (TR19/2), we also found that consumers may not always receive fair value because of parties in distribution chains earning high (and potentially excessive) levels of commission.

Our product governance requirements for General Insurance products stipulate that firms should now have carried out value assessments of their products. Firms should refer to FCA rules and guidance in Chapter 4 of the Product Governance (PROD) sourcebook.

We will ask some of the firms offering potentially lower value products to consumers, according to the value measures data, to explain the value of these products and the outcome of the firms’ fair value assessments.

In July 2022, we launched the Consumer Duty, with rules coming into force in July 2023 for products that are open for sale or renewal. While the Consumer Duty includes requirements around product governance, price and value, insurance firms subject to, and complying with, PROD 4 for non-investment insurance products, will already meet the products and services outcome, and the price and value outcome of the Duty. However, value metrics could also be potential indicators of wider issues under the Consumer Duty, helping to show if consumers are getting good outcomes. For example, claims complaints as a percentage of claims may also highlight issues with how firms are delivering consumer support during the claims process.

Under the Consumer Duty, firms must act to deliver good outcomes for their consumers. As part of this, they will need to:

• act in good faith
• avoid causing foreseeable harm
• enable and support consumers to pursue their financial objectives

Firms will also need to provide support that meets consumer needs and expectations, and ensure that consumers can use their product as reasonably anticipated and not face unreasonable barriers during the lifecycle of a product. This could include making sure consumer support and claims handling resources are adequate.

We expect that value measures data will help firms monitor if they are meeting these requirements.

We committed to publish the GI value measures data in Policy Statement PS20/9.

The data will provide firms, market commentators and organisations such as consumer groups, with common indicators of value across a range of GI products. By publishing this information, we aim to create incentives for firms to compete on broader elements of product value than price alone, and to improve the value of the products and services they offer consumers.

The data is not designed to support consumers directly while making decisions about insurance products. The data is also historic so may not reflect products and prices available today. If consumers have questions about the value of their insurance products, they should raise these with insurance firms directly. It is important that consumers understand what cover they are getting – and firms must make that clear to consumers during the sales journey.

The data includes firm specific information on claims frequencies, claims acceptance rates, average claims pay-outs and claims complaints as a proportion of claims, for a wide range of retail GI products.

Firms are required to report for relevant products sold to consumers in the UK where total retail premiums (written) are above £400,000 in the reporting period, and where there are more than 3,000 policies in force during the reporting period. We are publishing data about individual firms where the same reporting threshold is met at a granular product level.

We have included some additional contextual information at an aggregate product level to help readers interpret the data. For example, we have calculated the proportion of money raised in premiums that insurers paid out in claims. Our aggregated product level data only includes products where 5 or more firms submitted data.

In Policy Statement PS20/9 we said that we would not require firms to report claims cost information for legal expenses insurance or vehicle breakdown insurance. The data does not include related metrics for these products. 

Many factors potentially contribute to the value profile of a GI product – and it is important to consider all these factors rather than single metrics in isolation.

Some important factors will not be identifiable in the data but will influence the results. For example, business mix, age of the product, duration of policy (some products in our sample may be longer than 12 months), the reporting period (this initial sample period is just 6 months), target market, and volume of business could create significant variation across products or firms. External factors such as seasonality, inflation or societal issues could have a bearing – for example travel insurance data for July-December 2021 is likely to be impacted by travel behaviours during that phase of the Covid-19 pandemic.

As this is the first time we have collected and published this full data set (outside of the original pilot firms and products) it is possible that we may identify reporting inaccuracies or inconsistencies between firms. We will take steps as required to address such issues. We will be collecting data in February 2023 for the period January-December 2022 – and will publish this in due course.