08 March 2016
LMA welcomes claims ratio decision by FCA
The Lloyd’s Market Association (LMA) has welcomed the Financial Conduct Authority’s (FCA) decision not to publish claims ratios as a method for consumers to assess the value of insurance products.
In a feedback statement published on 1 March, the FCA stated it would not be adopting claims ratios as a means of providing value information and would instead pilot a broader scorecard system.
Steve Morrell, LMA Manager, Legal and Compliance, said: “We gave substantive feedback to the FCA to highlight our concerns about the mandatory publication of claims ratios. Our concerns arose because such ratios would not provide a useful measure of the value of insurance products and could even be confusing to buyers. This is particularly the case for specialist products, where claims ratios can be volatile.
“It remains to be seen just how useful the scorecard will be, but we welcome the direction the FCA has taken and look forward to working with the FCA to help them shape the pilot exercise.”
The concept of publishing the claims ratios of add-on insurance products in order to create greater transparency for consumers was first raised by the FCA in a discussion paper on transparency in March 2013. The FCA has now said it will adopt a ‘scorecard’ comprising a number of different measures which it will pilot on a limited number of products.
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Notes to Editors
For further information please contact:
James Milne, Communications Manager
Lloyd’s Market Association
T 0207 327 8405
T 020 7623 2368
An add-on insurance product is an insurance product sold as an additional element of cover to another insurance product. For examples, a motor insurance policy may give the purchaser the option to buy add-on cover for legal expenses.
Discussing the market’s response to the idea of publishing claims ratios, paragraph 1.8 of the FCA’s latest feedback document states:
“There was strong opposition to the claims ratio measure from firms; they considered it too complex for consumers to understand and ineffective for delivering a rounded assessment of value. There were mixed views about the benefits of the scorecard option, although some respondents recognised the potential benefits of a measure that covers a range of product metrics.”
About the Lloyd’s Market Association (LMA)
Formed in 2001 and located in the heart of the Lloyd’s Building in the City of London, the Lloyd's Market Association represents the interests of the Lloyd’s underwriting community. All underwriting businesses at Lloyd’s are members, together managing gross premium income of around £27billion per annum.