General insurance value measures data 2022

Value is the relationship between the overall price to the customer and the quality of service or benefit provided. Whether a product is delivering fair value will depend on a range of factors that firms should already be considering. For example, the nature of the product, the type and quality of service provided (including by parties in the distribution chain), the overall costs of manufacture and distribution and the quality of any benefit.

Firms should already be meeting their obligations as set out under PROD4[5] and our Consumer Duty[6].

We have concerns in 3 main areas:

• the extent and quality to which insurance firms have implemented and embedded these rules overall
   
• certain firms and specific products where intelligence shows that customers may not be receiving fair value – and whether firms are able to show that their value assessment of those products is in line with our rules
   
• initial indications from our supervision of firms shows deficiencies in product governance and a lack of adequate management information

We are particularly concerned that some distribution arrangements we saw do not clearly demonstrate how fair value is being delivered. We have seen what would appear to be high commission levels, and it was not clear how these products were being assessed to show they were consistent with fair value. For example, we have seen high levels of commission in distribution chains for what appears to be a standard non-advised sale, where it was not clear how the commission levels had been assessed to support the delivery of fair value.

Addressing these concerns is a key focus and over the coming months we will comment further on the action we are taking to address them.

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

• Claims costs as a proportion of premium range from 4% for GAP Insurance (Add on) to 65% for Motor (All), with the median in that range at 35%.
   
• Many of the products we commented on last time appear to still have the lowest proportion of claims costs to premiums written. These products include 4% for GAP Insurance (Add-on) (5% H2 2021), 7% for GAP Insurance (Standalone) (8% H2 2021) and 15% for Excess Protection (for Motor Insurance) (Add-on) (10% H2 2021).
   
• The larger retail insurance products recorded claims costs as a proportion of premiums written of 65% for Motor Insurance (all) and 50% for Home Insurance (buildings and contents combined). Travel Insurance (Annual European) (All) and Travel Insurance (Single Trip) (Standalone) were around 32% (9% and 18% respectively H2 2021), with the upwards shift in travel insurance likely to relate significantly to the lifting of travel restrictions coming out of the pandemic (Covid-19).
   
• Some add-ons reported a much lower proportion of premium paid out as claims compared to the corresponding standalone product. But we suspect firms may be taking an inconsistent approach around reporting products as add-on or standalone – and we will look further to improve clarity for the next publication.

This is the second dataset, and the first covering a full 12-month period. Users of the data can download the data tables and filter the firm specific information by product to explore the distribution of value measures across different firms.

Download GI value measures 2022 (XLSX)[3]

View the GI values measures tables

Users of this data have fed back to us that useability could be improved. The presentation of the data was consulted on, and we have made every effort to make the data as easy to use as possible. We will look at further improvements in the future.

We will be collecting data in February 2024 for the period January-December 2023 – and will publish this later in 2024.

Many factors potentially contribute to the value profile of a General Insurance 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 have terms longer than 12 months), target market, and volume of business could create significant variation across products or firms. External factors such as climate patterns, inflation or societal issues could also have an impact.

Users of this data should apply caution if comparing the data for January to December 2022 with our previous publication covering June to December 2021. The reporting periods are different, and the earlier dataset is more likely to be affected by the impact of the Covid-19 pandemic. For example, the % of premiums paid out in claims for Annual European Travel Insurance has gone from around 9% to 32%, which is likely to relate to the lifting of travel restrictions.

Firms are responsible for submitting complete and accurate data. We have taken steps to challenge and remediate material data quality issues where we have identified them. Ahead of the data collection, we also shared lessons with firms on data quality from our first publication. It is possible that reporting inaccuracies or inconsistencies may still exist between firms. Issues we have identified within this data collection include:

• the potential for inconsistent interpretation of ‘add-on’ versus ‘standalone products’
   
• whether some firms may be misunderstanding reporting requirements and duplicating data submitted by other firms

We will engage with firms ahead of the next data collection to explore and clarify any areas of confusion and improve data quality.

We committed to publish the GI value measures data in Policy Statement PS20/9[4].

The data provides 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 rather 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 their insurer or broker 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 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[12] 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.