Fair value assessments – time to grab the bull by the horns

BIBA’s Compliance team is receiving queries from members concerned at the lack of engagement that they are experiencing from manufacturers which would help them meet their requirements as distributors under the FCA PROD rules in relation to fair value assessments (FVA). Members are concerned that this will mean that they will be left facing a barrage of fair value assessments during the last fortnight of September 2022, leaving them insufficient time to complete information requests and their own reviews.  Manufacturers have until 30 September 2022 to complete their first annual round of FVA’s.

Some of the common concerns that members have raised with BIBA are summarised below:

Slow or no engagement
Insurers are not using the model industry template that was created for this purpose. While use of the template is voluntary, it was designed in collaboration with all insurance industry trade associations, to standardise the FVA process.  This would enable data requests to be handled in a standard format rather than create a cottage industry responding to lots of requests for bespoke data from insurers.   The form has been designed to aid brokers and insurers alike.
Product definition – in some cases, there are discrepancies in relation to how insurers have defined what a product is, compared to the broker’s own records. In some cases, insurers are also telling intermediaries that certain products are out of scope when the intermediary’s data suggests they are in-scope
Standard assessments – some insurers are asking intermediaries to select which product value assessments they need from an online portal that contains very high-level information about all the products they offer.
Cases where insurers have engaged but are asking for a huge amount of information from distributors.

See also  Why local is the golden touch in insurance

BIBA has raised these concerns with both the Policy and Supervision teams at the FCA so that they understand where the ‘bottleneck’ is and to encourage them to do something about it sooner rather than later.

Proactive engagement

With the clock ticking, we would now encourage members who have not heard from their product manufacturers to be proactive and to download the Product Value – Information Exchange Template and its associated guidance (available here) and fill in their section of the template.

Once completed you may email the form to each of the markets that you continue to want to do business with and ask the manufacturer in question to provide you with a fair value assessment.  Hopefully, this should prompt some movement or response from the manufacturer.  While you may not hear back from the manufacturer, or perhaps be asked to fill in the manufacturer’s bespoke form instead, at least you will be able to demonstrate to the regulator that you have been actively trying to comply with its PROD requirements should they ask.

BIBA has spoken to Matt Brewis, the FCA’s Director of GI Supervision, expressing our grave concerns about this process again and urged him to ‘encourage’ the supervisory teams under him to put pressure on insurers not to dump high volumes of data requests on distributors in the last fortnight of September 2022, which they could not, even with the best will in the world, hope to possibly complete in time.

We are aware that some insurers, such as Allianz and Chubb, have been proactive in seeking responses from brokers and we strongly encourage you to engage with these insurers now, to help minimise the situation mentioned above.

See also  Lockton enjoys higher global revenue

Broker value self-assessments

Brokers are required to undertake an assessment of whether the service they provide for the costs that their service adds to the amounts paid by clients, provides fair value in its own right. Members may provide different services to different types of clients and the assessment process should include consideration of this.

The Product Value – Information Exchange Template supports members in undertaking a review of the fair value of their services, so the suggestion above to complete and send this to insurer, may also help you to achieve the obligations placed on you.

BIBA members’ compliance and regulation queries should be directed to: compliance@biba.org.uk quoting their membership number.

The post Fair value assessments – time to grab the bull by the horns appeared first on British Insurance Brokers' Association.