PROD 4.5 Additional expectations for manufacturers and distributors in relation to value measures data

1PROD 4.5 applies to a firm which manufactures or distributes a general insurance contract product which is the subject of a reporting requirement within SUP 16.27 (General insurance value measures reporting).

1A firm which manufactures (in whole or in part) a value measures product must comply with the requirements in PROD 4.5.4R.

1The requirements on manufacturers referred to in PROD 4.5.3R are:

1. (1)

   that in relation to existing value measures products the firm has effective procedures in place to ensure that, on a continuing basis, the product offers fair value to customers in the target market, taking into account, among other things:

   1. (a)

      the needs of the target market;

   2. (b)

      the firm’s reasonable assessment of the value expectations of customers in the target market;

   3. (c)

      the value measures information, within a reasonable period;

   4. (d)

      any particular features of the product or the terms and conditions that may give rise to concerns about poor value;

   5. (e)

      appropriate product testing including scenario analysis and testing on consumers; and

   6. (f)

      the charging structure of the product including examination of whether the costs and charges are compatible with how useful the product is to consumers and the transparency of costs and charges.

   [Note: The requirement in PROD 4.5.4R(1)(c) applies from 1 July 2021, when SUP 16.27 entered into4 force.]

2. (2)

   that in relation to new products and significant adaptations to existing products, the firm’s product approval process in PROD 4.2.1R, product testing in PROD 4.2.22R5 including considerations in PROD 4.2.25R and the review of products in PROD 4.2.34R3 also incorporate the procedures and considerations in (1) above.

   2
3. (3)

   manufacturers that identify any aspects of a product that may mean the product does not offer fair value, must:

   1. (a)

      take appropriate action to mitigate the situation and/or prevent further occurrences of any possible detriment to customers;

   2. (b)

      inform any relevant distributors promptly about remedial action being taken; and

   3. (c)

      where relevant, not bring new products to market or make any proposed changes.

4. (4)

   manufacturers must regularly review the products it offers or markets to ensure they continue to offer fair value taking into account any event that could materially affect whether this remains the case.

5. (5)

   where the firm is required to submit a value measures report by SUP 16.27.7R, that the firm takes all reasonable steps to set up arrangements with firms entering into contracts of insurance as principal in relation to those products, to enable it to obtain the value measures data required to be included in the value measures report.

6. (6)

   where there is more than one manufacturer they must all outline in writing their mutual responsibilities arising under PROD 4.5.3R and 4.5.4R.

1Where a firm distributes a value measures product that it does not manufacture it must comply with the requirements in PROD 4.5.7R.

1The requirements on distributors referred to in PROD 4.5.6R are:

1. (1)

   that in relation to existing products it distributes, and any new products it proposes to distribute, the firm has procedures in place to consider, on a continuing basis, whether the product offers fair value to customers in the target market, taking into account the factors in PROD 4.5.4R(1)(a) to (f);

2. (2)

   where the firm is required to submit a value measures report by SUP 16.27.7R, that the firm takes all reasonable steps to have arrangements with the manufacturer of the value measures products and/or firms or persons entering into contracts of insurance as principal in relation to those products, to enable it to obtain the value measures data required to be included in the value measures report;

3. (3)

   distributors that identify any aspects of a product that may mean the product does not offer fair value, must:

   1. (a)

      take appropriate action to mitigate the situation and/or prevent further occurrences of any possible detriment to customers, including, where appropriate, amending their distribution strategy for that product; and

   2. (b)

      inform any relevant manufacturers promptly about any concerns they have and any action the distributor is taking.