Eversheds has commented on news that the UK Financial Conduct Authority (FCA) is set to intervene in the insurance add-ons market. Chris Busby, partner and financial services regulation expert at Eversheds, said the intervention raises myriad challenges for the industry.
Busby said: ‘This is a complex and diverse market. There has been historic malpractice, as recent final notices issued by the FCA demonstrate. However, there are some very useful add-on products so it will be necessary to analyse the benefits of each and how they have been sold to establish if there is any potential consumer detriment.’
Jeremy Irving, partner and insurance expert at Eversheds, added: ‘The FCA’s use of claims ratio statistics as a means to assess the fairness of customer treatment is a warning across the entire general insurance industry, not just in the personal lines market.
‘The FCA has previously indicated that it would apply this technique, and insurers will need to consider whether their books of business could be deemed to be “too profitable”, which could lead the FCA to raise questions as to sales, marketing and claims and complaints-handling methodologies’
According to Irving, allegations as to the excessive profitability of insurers’ books could also raise issues for intermediaries, including as to their use of delegated underwriting authorities from insurers.