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General Insurance under the FCA spotlight

A number of areas of General Insurance (GI) including GAP and scratch and dent insurance have come under new FCA scrutiny in recent weeks in a new thematic review of GI. The report could well signal further changes to the distribution model of these products.

On April 10th, the FCA published a thematic review, on the General Insurance (GI) chain. It focused on three areas; travel insurance, tradesman insurance and from the automotive retailing sector Guaranteed Asset Protection and ‘scratch and dent’ insurance.

The key theme from the findings was that the FCA was unhappy that customers were not being placed at the heart of firms business approach consistently and that a customer-focused culture had not been fully embedded within the culture of firms. The FCA’s overall conclusion was that they were; “extremely disappointing given the focus and emphasis placed on these areas by the FCA in recent years.”

Central to the FCA’s concern was the way in which the established net pricing model allows the dealer to mark up the final price to enhance their own earnings; it is a similar concern to that highlighted by the FCA concerning DiC commission based pricing for motor finance in their March motor finance review.

The FCA’s concern is crystallised in their observation that; “the value of these products can be compromised by the remuneration received by some parties in the chain, potentially leading to harm to customers.”

While the overall conclusion from the FCA's findings is disappointing, the regulator was not universally damning. They highlighted that "there were many other GI distribution chains and products we considered in our work which appeared to be delivering good value insurance products and appropriate outcomes, with no evidence of these harms manifesting" and that the themes and issues "were by no means universal across the sample of firms and products we considered in our work."

Working with our many dealer and OEM partners, it is these good practises that we must look to ensure are embedded universally across the added value service distribution chain. Already I see the impact and feedback for dealers working with our compliance business, which works with many dealers to ensure their processes, controls and operating culture are aligned to the FCA’s expectations. This type of collaborative approach will be essential as we work to ensure the needs of customers are always ‘front & centre’ in the promotion of GI services, which can and do add value to customers as witnessed by our current Trustpilot score of 8.8/10 from 3802 reviews.

Change for GI in motor retailing does look likely, a reality reinforced by the updated regulatory framework; the introduction of Insurance Distribution Directive (IDD) Rules and the Senior Managers & Certification Regime (SM&CR) introduced at the end of last year for insurers, with dealers set to come under the same SM&CR responsibilities from December 9th this year.

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