Modern Insurance Magazine Issue 62

INSIGHT
Now the FCA has tasked us all with a massive collective
challenge – design your products right, make sure it works,
provide evidence that it is understood by the consumer, and
show everyone that it does indeed work through a seamless
and transparent claims process.
Back to the beginning, then…
When an insurer or broker comes up with a bright idea,
we need to create a product or service for a certain type
of individual or business, one that will meet their exact
needs. So, what does the insurer need to do to deliver this
to market, with a huge focus simultaneously on the delivery
of key outcomes? In other words, how are we going to put
the thing together so it is ready for the road? And we will
know that beforehand, as the road testing is integral to the
design, building of the prototype, etc?
The new principle is simple. “A firm must act to deliver good
outcomes for retail customers.” Wait, I hear you ask. What
are retail customers? We have been used to this definition
since 2005 - it does include individual policies, but nothing
considered as a ‘group’. SME business is included, but
large corporate business is not – meeting the ‘Large Risk’
definition instead. Why this doesn’t apply to everyone is
beyond me, but anyway, I digress…
Let’s focus on the four key outcomes…
OUTCOME 1
Products and services must be sold or
provided at a fair price that reflects
their benefits.
This is a two-part equation. How has the insurer priced the
product, and is that fair? Then, what services will the broker
(and anyone else in the chain) provide, and is the payment
they get for this sale (the commission) also fair? If you think
this sounds like the Product Value Assessments that took
place back in September 2022, you’d be right.
If we go back to the car analogy, think of this as the
collection of glossy booklets, plus a shed load of other stuff
from the manufacturer. Is it a special scheme, has it cut
down benefits, have excesses gone up, and are there any
additions to enhance cover?
OUTCOME 2
Products and services that are fit for
purpose - with terms and features that
match the needs of the consumers
they’re made for, and that work as
expected.
This is where the sharing of claims data is a must. Does
the product actually work, and can the adviser use this to
demonstrate efficacy to the prospective customer?
Think of this as the test drive. Have we consulted with
customers to gauge what they want, what works best for
them, what’s important, and what’s less so? What is the
customer prepared to pay for revolutionary new ideas?
MODERN INSURANCE | 9