Measuring up to value
Paul Thompson, CEO Cavere Group, writes a regular column in Mortgage Introducer Magazine.
In January the FCA launched its GI value measures consultation. The aim of the consultation is to address poor product value and quality, and reduce the risk of unsuitable GI products being bought or sold. The consultation follows on from the FCA’s GI add-ons market study in which it identified poor product value as a key area of harm. With the results of this hitting your desk, now is the time to understand what this all means for you.
So what are the value measures?
Claims frequency, claims acceptance rate, average claim pay out, and claims complaints are the four value measures insurers will be responsible for reporting. Insurers are already required to report on the first three to the FCA, the difference now being that as a result of the consultation this value measures data will be available to customers.
In general I am supportive of the measures. I believe brokers should be informing customers about them as it will help them up sell quality, and it will support the view that customers should and will pay more for true peace of mind. However, I urge you to be careful as the value measures in themselves may not offer a true representation of the actual product being offered.
Often the thing that drives claims being declined is the placing of inappropriate cover. It’s easy to just go with the insurer that pays out on 90% of claims, but this could still back fire if the cover sold isn’t fit for purpose. A customer could buy an off the peg building and contents policy and find later down the line that it doesn’t cover accidental damage, or a home insurance package that covers water damage but doesn’t include trace and access. It’s not that the insurer is wrong not to pay out, or that their cover isn’t fit for purpose, it’s that it was not the right cover for that customer in the first place – this is why intermediaries are so important.
Talk to your clients and understand exactly what they need, their lifestyle and what matters most to them. Don’t risk their ability to claim. Look for policies that provide the most comprehensive cover at a price they can afford and inform them of exactly what they are covered for, the exclusions, the excesses etc.
Your GI provider should be able to assist you with this, and providing they have strong relationships with insurers they should be able to access innovative products, bespoke solutions or off-panel underwriting to ensure you get the policy right from the outset. Not only will this provide peace of mind that your clients are covered should they need to claim, but also that their premium won’t go up at renewal.