Reference Case Number: FOI11746
Freedom of Information: Right to know request:
Thank you for your email of 17 October 2024, clarifying the scope of your request concerning our investigation of GAP policies. The full text of your email can be found below at Annex A
FCA response:
Prior to engaging with the GAP insurance market, we considered our general insurance value measures data. In our Value Measures data[1] (2022) we identified that in some distribution chains, as little as 6% of premiums were paid out in claims. We also saw examples of firms paying out up to 70% of the value of insurance premiums in commission to parties in the distribution chain.
When we first wrote to GAP insurers (September 2023), we reminded them of our expectations to make sure they are checking their products are providing fair value to their customers.
Attached in Annex B is the letter where we asked GAP insurers to provide the following to the FCA:
- Information on commission, gross written premium, and claims information
- The firm’s existing assessment(s) demonstrates its GAP products provide fair value to customers as required by our rules (PRIN 2A.4)[2]
- The firm’s proposals for improving the value of its GAP products
We requested these details to help us gain insight into how firms were satisfying themselves their GAP products offered fair value to customers. Where firms were unable to evidence this, we agreed with firms they would pause the sale of GAP products until they had carefully considered our rules and demonstrated that they had satisfactorily addressed our feedback. Following our feedback, the firms that were able to evidence they had made satisfactory changes to their fair value assessments and the product, we agreed to allow them to restart sales of GAP products[3]. We continue to work with firms to review their submissions and are providing feedback following our assessments.
We have since published our General Insurance Value Measures data[4] (2023).
Finally, with regard to your comments concerning the relevance of section 348 of the Financial Services and Markets Act 2000 (FSMA) to the information you have requested, we agree that section 348 FSMA does not apply to the information you are seeking.
The reference to section 348 of FSMA was based on a slight misunderstanding on our part of your previous request, whereby we interpreted ‘information sought and considered’ to mean you were asking us to disclose the information that the firms had provided to us. Thank you for clarifying the scope of your request, and we apologise for the misunderstanding.