YOUR COMPLIANCE MATTERS:         General Insurance Pricing Practices (GIPP) (3)

YOUR COMPLIANCE MATTERS:         General Insurance Pricing Practices (GIPP) (3)

 

Relevance:                 All firms.

 

Action required:       1) Understand what data your firm is required to report to the FCA

2) Liaise with your software provider to ensure that they will have

systems in place to enable compliance with the new rules

 

Previous newsletter emails on this subject have covered;

·        A general overview of GIPP; and

·        The Pricing Practices Survey,

 

This newsletter will outline the data you will be expected to report to the FCA. You will need to ensure that your software suppliers are able to allow you to comply with the new rules.

 

Reporting Requirements

 

You will need to submit regular reports for retail home and motor insurance products where you set prices. If you determine the price of any associated items, including premium finance and any fees charged, you will need to report on these.

 

Information for each product is required to be split by:

·        The sales channel;

·    including direct (telephone, online and branch), intermediated, intermediated via price comparison websites, and affinity/partnership channels.

·        The length of time a customer has held their insurance with the firm.

·        Closed books of business;

·    information on these books of business will need to be split by product and tenure but not by sales channel.

 

Where you determine the cost of a product, or fee, detailed information will be required, as follows:

·        Net/gross premiums;

·        Total/average premiums;

·        Expected claim ratios;

·        Average prior year premiums;

·        Proportion of customers with expected claims ratios between %s;

·        Incurred claims ratios and reserve movements;

·        Fee information;

·        Premiums and policy numbers for add-ons/premium finance;

·        Premium finance, add-ons and fees and charges.

 

Price-setting intermediaries will be required to submit the following information by sales channel, product and tenure:

·        Total gross written premium;

·        Total net rated written premium;

·        Average gross premium;

·        Average net rated premium;

·        Average prior year gross premium;

·        Total number of policies incepted/ renewed;

·        The number of policies in force at the end of the reporting period;

·        Expected claims cost;

·        Expected claims ratio.

 

A new form has been devised to report to the FCA on; referred to as REP021.

·        A copy of the report form can be found at the following link;

SUP 16 Annex 49A Pricing information report form (REP 021) - FCA Handbook

 

·        A set of notes to help in completing the report form can be found using the following link;

SUP 16 Annex 49B Notes on completing the pricing information report form (REP 021) - FCA Handbook

 

It should be noted that:

·        All firms should complete Sections 1 and 6 of (REP021), and in addition,

·        insurers and managing agents should complete Sections 2 and 3, and

·        Price-setting intermediaries should complete Sections 4 and 5.

 

In a change to their initial proposal, the FCA require firms to submit a single interim report covering the six months ended 30 June 2022, by 30 September 2022. This is intended to allow firms enough time to make the necessary changes to their systems and reporting processes.

 

Systems

 

Knowing what information is needed for the new report form is one thing, collecting it is another.

 

Where firms use their own in-house systems, work should already be underway to make the necessary changes.

 

However, where firms are reliant upon third-party software providers, they should be seeking an update on the progress being made by those firms. The FCA are unlikely to accept a failure by a firm to make the required report due to an inability to get the information from the systems used by that firm.

 

It is vital that firms make contact immediately with the third-party firms, if they have not already done so.

 

Just as a reminder, all these matters are taken from the Policy Statement published by the FCA that primarily (but not solely) stemmed from the practice of price differentiation, between new business and renewal premiums, how this was carried out by firms and its potential impact on consumers.

 

The full policy statement can be found using the following link;

 

PS21/5: General insurance pricing practices market study: feedback to CP20/19 and final rules (fca.org.uk)

 

The new rules come into effect as follows:

·        The rules relating to systems and controls and product governance will come into effect on 01 October 2021.

·        The rules on pricing, auto‑renewal and reporting will come into effect on 01 January 2022, with a transitional provision (up until 17 January) for the rules on pricing and auto‑renewal disclosure.

 

As previously indicated, we will be issuing further newsletters over the coming weeks to assist firms with getting ready for the revised arrangements.

 

If you need to discuss any aspect of this matter with us, please make contact in the normal way.