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SUP 16.27 General insurance value measures reporting

Application

Who?

SUP 16.27.1R

1The effect of SUP 16.1.1R is that this section applies to every firm of a type listed in column 1 of the table in SUP 16.27.8R.

SUP 16.27.2R

1The rules in this section do not apply to a TP firm or a Gibraltar-based firm where the state of the risk is an EEA State or Gibraltar, to the extent that the EEA State in question or Gibraltar imposes measures of like effect.2

What?

SUP 16.27.3R

1This section applies to a firm which has carried on the business described in column 2 of the table in SUP 16.27.8R in relation to general insurance contracts:

  1. (1)

    which are of a product type set out in SUP 16 Annex 48R;

  2. (2)

    excluding contracts set out in SUP 16.27.4R; and

  3. (3)

    excluding contracts entered into where the customer was habitually resident outside the UK at the time.

SUP 16.27.4R

1This section does not apply in relation to the following types of general insurance contracts:

  1. (1)

    no claims bonus protection;

  2. (2)

    private medical insurance;

  3. (3)

    contracts provided with a packaged bank account;

  4. (4)

    contracts entered into by a commercial customer; or

  5. (5)

    group policies.

Purpose

SUP 16.27.5G
1
  1. (1)

    3The purpose of this section is to require firms to submit information on certain value measures general insurance contracts in a standard format to the FCA. This information enables the publication of the value measures data in the pursuance of the FCA’s effective competition and consumer protection objectives.

  2. (2)

    3The purpose of SUP 16.27 is to provide the FCA with general insurance value measures data that it can use to publish guidance (and which may also assist with the FCA’s monitoring of firms’ compliance with PROD 4.5). The purpose of that publication is to:

    1. (a)

      promote competition in relation to product value, by creating incentives for firms to make improvements to products and address poor product performance; and

    2. (b)

      protect consumers by reducing the potential for harm caused by the sale or purchase of poor value products.

Definitions

SUP 16.27.6R

1In this section and SUP 16 Annex 48R, SUP 16 Annex 48AR and SUP 16 Annex 48BG:

“add-on policy” means

a policy that is sold in connection with, or alongside, another product.

“average claims pay-out” means

total claims pay-out cost divided by the number of claims where all or part of the claim has been accepted and a pay-out has been made and/or benefits provided and the claim is closed at the end of the reporting period.

“average number of policies in force” means

the average number of policies in force during the relevant reporting period, calculated by adding up the total policies in force at the end of each month and dividing by the total number of months in the reporting period.

“claim” means

any claim made by a potential beneficiary, including queries in respect of a potentially claimable event or loss (which has taken place).

“claims acceptance rate” means

(a) the number of claims registered; less

(b) the number of claims rejected; divided by

(c) the number of claims registered.

“claims accepted” means

claims where all or part of the claim has been accepted and a pay-out has been made and/or benefit provided, and the claim is closed or settled during the reporting period.

“claims complaints” means

complaints of a type that are reported in column O of the DISP 1 Annex 1R Table 4 or would have been reported if the threshold of 500 opened complaints was disregarded.

“claims complaints as a percentage of claims” means

the percentage calculated using the formula:

A/B x 100

where:

(a) A = claims complaints

(b) B = claims registered

“claims frequency” means

the number of claims registered divided by the average number of policies in force.

“claims pay-out cost” means

the total costs of providing benefits to policy beneficiaries in relation to claims accepted during the reporting period including:

(a) the total monetary value (£) of claim pay-outs;

(b) the total cost incurred by the provider firm in providing non-monetary benefits; and

(c) specific claims costs incurred by the provider firm in handling individual claims including claims investigation costs.

“claims registered” means

all claims during the reporting period less the number of:

(a) claims walkaways;

(b) claims in respect of which the potential beneficiary reports an event or loss giving rise to the claim but does not wish to make a claim;

(c) claims rejected for insurance fraud; and

(d) claim rejected because the policy has been lawfully voided by the insurer.

“claims rejected” means

claims by potential beneficiaries of the policy, declined or rejected in the reporting period, regardless of:

(a) when the claim was registered;

(b) whether or not the claim is rejected at the first notification of loss;

(c) whether the claim is rejected for breach of a policy condition, pursuant to an applicable policy exclusion, due to the application of an excess or otherwise,

but excluding claims rejected for insurance fraud or because the policy has been lawfully voided by the insurer.

“claims walkaways” means

claims closed during the reporting period due to the potential beneficiary not pursuing the claim.

“distribution arrangement” means

in relation to the relevant product, each distribution arrangement through which the product is sold, as identified by the consumer facing firm or brand.

“no claims bonus protection” means

a contract of insurance which will, in the event of a claim, within certain limits, protect the purchaser’s number of years during which a person is deemed not to have made a claim for the purposes of calculating the no claims bonus discount incorporated by a provider into the price of a motor insurance product.

“policy sales” means

policies sold in the reporting period, including renewals, and regardless of the period covered by the contracts.

“reporting period” means

(a) the period beginning on 1 January and ending on 31 December; or

(b) any shorter period in accordance with SUP 16.27.12 (2).

“stand-alone policy” means

a policy that is not sold in connection with, or alongside, another product.

“total gross retail premiums (written)” means

the total amount of gross written premium, based on the premiums charged to the end consumer (excluding insurance premium tax) in relation to policies sold during the reporting period.

“value measures data” means

the data required to be included in a value measures report and set out in SUP 16.27.10R to 16.27.11R.

“value measures report” means

the report referred to in SUP 16.27.7R.

Requirement to submit a value measures report

SUP 16.27.7R

1Where a firm of a type set out in column 1 of the table in SUP 16.27.8R has carried on the business in column 2 of the same row in relation to the products set out in SUP 16 Annex 48R, it must:

  1. (1)

    submit to the FCA a report containing the value measures data in relation to that business; and

  2. (2)

    submit the report in accordance with SUP 16.27.12R to SUP 16.27.17R.

SUP 16.27.8R

1This is the table referred to in SUP 16.27.7R.

(1) Type of firm

(2) Nature of business

An insurer other than a TP firm or Gibraltar-based firm2

all contracts of insurance effected by the insurer.

A TP firm or Gibraltar-based firm2

all contracts of insurance effected by the TP firm or Gibraltar-based firm2 from an establishment of the firm2 (or its appointed representative) in the UK.

A TP firm or Gibraltar-based firm2

all contracts of insurance effected by the firm2

(a) from an establishment outside the UK with a customer in the UK2; and

(b) which were not manufactured by a firm2 operating from an establishment in the UK.

A firm2 manufacturing from an establishment in the UK

all contracts of insurance effected by a TP firm or Gibraltar based-firm from an establishment outside the UK with a customer in the UK2.

A firm, a TP firm or a Gibraltar-based firm2 which, from an establishment in the UK, either:

(1) manufactures; or, if not,

(2) advises on or proposes contracts of insurance which it does not manufacture.

all contracts of insurance effected by a firm2 from an establishment outside the UK with a customer in the UK without carrying on a regulated activity in the UK2.

An insurance intermediary

contracts of insurance in relation to which:

(a) the insurance intermediary carried on or was responsible for insurance distribution activities; and

(b) the provider entering into the contract as principal is not an authorised person in relation to that activity. References to firms in SUP 16 include references to these unauthorised providers, where the context requires.

A managing agent

any contracts of insurance written at the Society.
SUP 16.27.9R

1Firms must comply with the following in relation to the table in SUP 16.27.8R:

  1. (1)

    where different insurers underwrite different elements of the cover that form part of the same policy, then the insurer underwriting the main part of the cover (and in the event of any doubt, the first part of the cover recorded in the policy) must report the value measures data for all elements of the cover (including optional extras and cover extensions);

  2. (2)

    the exception to (1) is in relation to policies which include a legal expenses product element (after the event or before the event legal expenses,4 as described in SUP 16 Annex 48R), where the insurer of the legal expenses element must separately report the value measures data for the legal expenses element; and

  3. (3)

    references to manufacturing are to manufacturing in whole or in part. Where there is more than one firm referred to in column 1 that manufactures a contract of insurance, then only one must report the value measures data and each firm must agree in writing with the others which firm is responsible.

Content of the report and value measures data

SUP 16.27.10R

1A value measures report must contain value measures data set out in SUP 16.27.11R as follows:

  1. (1)

    the data must be completed in respect of each of the products set out in SUP 16 Annex 48R; and

  2. (2)

    the data must only be included in relation to each product within the scope of SUP 16.27 where both of the following criteria have been met in respect of that product in the relevant reporting period:

    1. (a)

      total gross retail premiums (written) exceed £400,000; and

    2. (b)

      more than 3,000 policies involving the firm in the manner set out in column 2 of SUP 16.27.8R are in force.

SUP 16.27.11R

1The value measures data is:

  1. (1)

    the number of policy sales;

  2. (2)

    total gross retail premiums (written);

  3. (3)

    the number of claims registered;

  4. (4)

    average number of policies in force;

  5. (5)

    claims frequency;

  6. (6)

    the number of claims accepted;

  7. (7)

    the number of claims rejected;

  8. (8)

    claims acceptance rate;

  9. (9)

    total claims pay-out cost;

  10. (10)

    average claims pay-out;

  11. (11)

    the amount that the top 2% of claim pay-outs are above;

  12. (12)

    the names of the five largest distribution arrangements;

  13. (13)

    the number of claims walkaways;

  14. (14)

    the number of claims complaints; and

  15. (15)

    claims complaints as a percentage of claims.

Annual submission date and reporting period

SUP 16.27.12R
  1. (1)

    1The value measures report must be submitted annually on or before 28 February and contain information in relation to the immediately preceding reporting period.

  2. (2)

    Where a firm carried on business in relation to one or more of the products set out in SUP 16 Annex 48R for part of a reporting period, its value measures report should contain value measures data for the part of the reporting period that it operated.

Format and method of submission and format

SUP 16.27.13R

1A value measures report must be completed using the form and format set out in SUP 16 Annex 48AR, using the notes for completion in SUP 16 Annex 48BG.

SUP 16.27.14R

1The report must be submitted online through the appropriate systems accessible from the FCA’s website.

SUP 16.27.15R

1A value measures report will not be considered as submitted to the FCA unless all the mandatory reporting fields set out in SUP 16 Annex 48AR have been completed correctly and the report has been accepted by the relevant FCA reporting system.

SUP 16.27.16G

1If the FCA’s information technology systems fail and online submission is unavailable for 24 hours or more, the FCA will endeavour to publish a notice on its website confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 16.3.9R (Method of submission of reports) should be used.

Value measures disclosure

SUP 16.27.17R

1Any firm that submits a value measures report to the FCA must include a statement that:

  1. (1)

    it understands that the FCA produces and publishes guidance that contains the value measures data that the firm submitted to the FCA; and/or

  2. (2)

    it has informed any other firm to whom the relevant value measures data relate that the FCA publishes the guidance referred to in (1).

Publication of value measures data by the FCA

SUP 16.27.18G

1The FCA publishes guidance that contains the value measures data for the following purposes:

  1. (1)

    to promote competition in relation to product value, by creating incentives for firms to make improvements to products and address poor product performance; and

  2. (2)

    to protect consumers by reducing the potential for harm caused by the sale or purchase of poor value products.

SUP 16.27.19G

1The FCA publishes firm-level value measures data in bands. The FCA will only publish firm-level value measures data in bands for claims frequency, claims acceptance rate, average claims pay-outs and claims complaints as a percentage of claims where the value measures report shows that, in respect of the relevant product, both of the criteria in SUP 16.27.10R(2)(a) and (b) have been met.