At Earnix’s mid-September conference in London, RSA’s chief underwriting officer discussed how fair value might be applied to the increased quantity of products in the market

There has been a notable increase in the quantity of insurance products in the market, according to Justin Clarke, chief underwriting officer at RSA.

Speaking during a session entitled Disruption and Pricing on the second day at Earnix’s two-day conference – held between 13-14 September in London – Clarke told delegates: “With that, there’s lots of demands, lots of new competitors. [But] all these tactics from insurers are within the [FCA] rules to really utilise the product and optimise the product back to the customer.

“The game in town now is not just about price but also about product optimisation.” 

By product optisation, Clarke referred to making changes to a product to make it more desirable to the consumer. 

Clarke gave the example of a customer landing on on an insurer’s website providing the insurer with an opportunity to upsell with similar products – this fits into the FCA’s “added value approach”.

Under the FCA’s analysis of the need for its fair value requirements for general insurance (GI) home and motor products, poor product value was identified as an area of harm – to address this, the regulator introduced reporting requirements for firms to ensure they could demonstrate this via product assessments.

Currently, GI firms must report claims frequencies, claims acceptance rates, average claim pay-outs and claims complaints as a percetage of claims and ensure that products offer fair value to customers in the target market.

Clarke also predicted that additional reporting requirements would be set by the regulator over the next few months.

Close eye on compliance

Clarke warned, however, that there may be a problem after 12 months of a product being on the market, because firms can start issuing renewals.

He explained: “If you are driving lots of new products, it’s great for a short period, but it can become a bit of a headache unless it is managed quite carefully.

”Something I think the FCA will be keeping a close watch on, is to ensure [firms] are not trying to circumvent rules by understanding the business product, trying to close it down and then starting a brand new one again.”

Clarke believes that although home and motor are the biggest markets for new products, this growth of product quantity could also start to trickle out into wider consumer products or personalised products.

He added: “Theory says if you constrain a market, it becomes less efficient – but that might take a few years.”