Find out about our fourth publication of value measures data under our General insurance (GI) value measures pilot. This data highlights concerns about the value of personal accident and key cover add-on insurance. We delayed publishing this data because of our recent focus on work related to the coronavirus (Covid-19) pandemic. The value of insurance for consumers continues to be an important area for us.
The value measures data will provides firms, market commentators and organisations such as consumer groups with common indicators of value across a range of insurance 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 includes information on claims frequencies, claims acceptance rates and average claims pay-outs for 4 products: home, home emergency, personal accident and key cover.
We have also calculated the proportion of money raised in premiums that insurers paid out in claims. This varies significantly from one product to another, suggesting that some may offer worse value than others.
Chart tips: hover over data series to view the data values and filter the data categories by clicking on the legend.
Chart
Data table
We are particularly concerned about the potential value of personal accident and key cover where these are sold as ‘add-ons’ to other insurances. For the 2019 data, less than 20% of the value of premiums firms received for these add-ons was, on average, paid out in claims. The data varies from firm to firm. By comparison, many firms pay the equivalent of over 30% of premium income in claims for home emergency cover and over 50% for buildings and contents home insurance. This is set out in the chart above. We plan to follow up with certain firms to discuss their pilot data.
The data in the chart above for home emergency (standalone) is based on a simple average across the firms, and the data for home-emergency add-on excludes one pilot firm. The data for the other products is based on a weighted average.
Last year we consulted on proposals[2] requiring firms to report value measures data to us for all general insurance products, with a few exceptions. We are refining these proposals and expect to publish a Policy Statement this autumn.
Firms that manufacture insurance products must have a process in place for product approval, and keep this under review. Manufacturers are also required to monitor and review their products and assess whether these remain consistent with the needs, characteristics and objectives of the target market.
As well as our work on value measures we have been continuing our work from the General Insurance pricing practices market study[3]. That study found that the home and motor insurance markets are not working well for all consumers and, while many people shop around, other consumers are not getting a good deal. We expect to publish the final report and consult on rule changes to pricing practices later this year.
This publication covers[4] the year ended 31 August 2019. The previous datasets for the year ended 31 August 2016, 31 August 2017 and 31 August 2018 were published in January 2017, March 2018 and January 2019 respectively.
Pilot products
The general insurance products included are:
The value measures data gives firms, market commentators and organisations such as consumer groups indicators of value across a range of insurance products. By publishing this information, we aim to create incentives for firms to compete on broader elements of product value than price alone, and improve the value of the products they offer. The value measures data will also provide data to our supervision teams, to help assess whether firms are meeting their product governance obligations.
- home (combined buildings and contents)
- home emergency insurance
- personal accident insurance, sold as an add-on to motor or home insurance
- key cover sold as an add-on to motor insurance
Value measures
- Claims frequencies: How often consumers are claiming on their insurance policies – calculated as the number of claims registered, divided by the average number of policies in force.
- Claims acceptance rates: How likely claims are to be accepted – calculated as the number of claims registered less the number of claims rejected, divided by the number of claims that have been registered.
- Average claims payout: Average claims payout which could include internal costs and relevant external costs as well as payouts to policy beneficiaries. For example, costs could include internal or external claim investigation costs or payments to third parties to repair a customer’s damaged wall.
See more details on the definitions and the information request and guidance[8] we gave to firms providing the data.
Background
In our general insurance add-ons market study[9] we found poor value in both add-on and some stand-alone products sold by firms. Following the market study, we announced in Feedback Statement 16/01[10] that we would pilot the publication of value measures data. We have now published 4 annual sets of data covering claims frequencies, claims acceptance rates and average claims pay-out by UK and EEA insurers for 4 general insurance products. The pilot has allowed us to develop and refine value measures ahead of the consultation[2] we published in 2019. We expect to publish a policy statement on value measures later this quarter.
To find out more about the background to the pilot see:
DP15/4 – Developing General Insurance Add-ons Market Study – Remedies: Value Measures [11]
FS16/01 – Feedback Statement on DP15/4 – General insurance value measures[11]