FCA product overhaul will lead to new working practices for large personal lines brokers 

By Content Director Saxon East

It is the difficult question that people have been asking: who has the most to lose in the FCA’s pricing crackdown? 

The FCA at first highlighted price comparison sites as particularly vulnerable to lost revenue from its product overhaul. 

Yet they also have some sizeable advantages. Several big players, especially Comparethemarket, dominate the sector. We can expect them to squeeze insurers and brokers harder to compensate for any lost revenue amid customers switching less. 

So it now appears that large personal lines brokers will face the biggest challenge. 

Fair value

It becomes more clear by the day the extent to which these reforms will impact personal lines brokers. 

Former FCA chief turned consultant Michael Sicsic, speaking to Insurance Times in the run up to our Insurance2025 event, where there will be a panel discussion on fair pricing, stressed that this regulatory change encompasses so much more than just pricing adjustments. 

Michael Sicsic

Michael Sicsic will be speaking on FCA pricing and product reform panel at Insurance2025. Click here to join 

Sicsic believes that at the very heart of the reforms is the regulator wanting insurance firms to demonstrate ”fair value”. 

It means that personal lines brokers - who are heavily reliant on non-core revenue - will have to show fair value across premium finance, add-ons and the main product. 

How do you do this?

One way is to list the benefits of the products versus the price.

This should then be layered with benchmarking to ensure prices are not out of line with the market. 

Add-on products, such as legal expenses insurance - which the FCA has previously described as ”useful” - will need much more detail offered up to the regulator. 

At most risk is those brokers taking high interest on premium finance and price walking customers. 

That model really is coming to an end; the regulator simply will not stand for it any more. 

Personal lines evolution 

The UK insurance industry has always admired the innovation of personal lines brokers to navigate market change amid direct players, price comparison sites and insurtech competition. 

But this FCA change really will be a crushing blow in the short-term to the larger players. 

In the long-term though, there is a way through. 

Firstly, the focus on specialist products and services is an area where personal lines brokers can shine. 

Secondly, it is vital that their customer service is excellent. It has to be superior to insurers. 

When the dust finally settles, the customer can be the ultimate winner. Something good can come out of these tumultuous reforms.