Under the FCA’s rules, we are required to inform you we have governance processes in place to oversee the design, approval and review of our products that adhere to regulatory requirements set by the General Insurance and Pure Protection Pricing Practices Market Study (PS21-05) and Consumer Duty (PS22-09). We regularly review our products to ensure that they remain suitable for the target market and that they continue to operate in line with customer expectations. This includes an assessment of the value received by customers through our products; which is referred to as the ‘Value for Money Assessment'.
Aviva’s Fair Value Assessment Approach
Controls
We have well established governance processes which:
• Formalise approval of new product developments and changes to existing products
• Identify target markets for each product
• Test customer understanding
• Consider needs of vulnerable customers
• Monitor post-sales performance.
Product development
Launching new products, or making material changes to our existing products, is governed through our Product Development Process. Before new products, or changes, are launched, our internal governance arrangements ensure that the following assessments are undertaken and approved:
- Identification of the target market and non-target market for each product
- Ensuring the Distribution approach aligns to the needs of the target market
- Assessment of costs and charges and how these impact on Fair Value for the customer
- Consideration of characteristics of vulnerability within the target market group
- Ensuring that Customer Communications are clear and transparent
Ongoing monitoring
After we introduce our products to the market, we regularly review them to check that they remain suitable for the target market and that they continue to operate in line with customer expectations. This includes an assessment of the value received by customers through our products; this is referred to as the ‘Value for Money Assessment’. The Value for Money Assessment considers a range of indicators and measures which contribute to the overall value delivered to our customers. The measures include:
- Customer Market and Distribution Strategy - Ensuring that the target market is defined at a sufficiently granular level and distribution approaches are appropriate. This is done by assessing customer demographics, product persistency and oversight of distributors selling the product.
- Customer claims – assessing the claims experience of the product, including a review of whether the customer benefit ratio - value of claims paid out compared to the value of premiums received – is within tolerance, an assessment of whether claims accepted vs. claims declined is within a set tolerance and analysis of declined claims.
- Commission and margin levels - to ensure these are appropriate for the service received by the customer. This includes reviews of the commission ratio – the proportion of a customer premium that goes towards paying commission, profit ratio – the proportion of a customers premium that goes towards profit, and a breakdown of a customers total premium to indicate how much goes towards customer, distributor, and manufacturer costs.
- Complaints - analysis of customer complaints to identify and resolve root causes in particular where the product fails to deliver as expected. The percentage of customer complaints received will be assessed against the total number of active customers and will be judged against a set tolerance.
- Service delivery – to ensure service levels are in line with those we have led customers to expect. Several metrics will be assessed across operations (customer feedback surveys, percentage of calls answered, quality assurance), claims(claims customer feedback surveys, percentage of claims settled, percentage of calls answered) , and underwriting (straight through processing rates).
- Communications - to ensure customers receive communications which are clear, accurate, timely and appropriate. Customer communications will be assessed against the Aviva standard which was brought in following Consumer Duty.
We base our level of oversight on the type and complexity of each insurance product, our identified target markets and the level of financial understanding.
Value for Money Assessment outcomes
We've now completed our Value for Money Assessments for our protection products and our currently marketed product outcomes are shown in the table below:
| Individual Protection | Value Assessment Outcome |
|---|---|
| Business Life Insurance Options | Fair Value |
| Critical Illness+ | Fair Value |
| Income Protection+ | Fair Value |
| Life Insurance+ | Fair Value |
| Living Costs Protection | Fair Value |
| Relevant Life Insurance | Fair Value |
| Simple Life Insurance | Fair Value |
| Whole of Life Insurance+ | Fair Value |
| Fracture Cover | Fair Value |
| Global Treatment | Fair Value |
| Group Protection | Value Assessment Outcome |
|---|---|
| Group Critical Illness | Fair Value |
| Group Income Protection | Fair Value |
| Group Life | Fair Value |
| Spouse Partner Life Assurance | Fair Value |
Our assessments include any commission or fees paid to distribution partners as part of the sale or servicing of a product we are aware of. Should the customer pay additional fees or charges directly to the distribution partner which Aviva are not aware of, then we expect the distribution partner to ensure that these do not adversely impact on the overall Value for Money received by the customer in line with its own requirements under PROD 4.3. We may periodically contact you for details in relation to the remuneration associated with the distribution arrangement so we can assess the ongoing value of the products we manufacture.
For further information regarding our Target Market Statements and Value for Money Assessments (Group Protection) and Statements of Facts (Personal Protection), please visit our document library.