In October 2021, the Financial Conduct Authority (FCA) issued a strengthening of the rules over Product Governance, with particular focus on the measurement and ongoing monitoring of Fair Value for customers. Further to this, the scope of these requirements was broadened to include all products and services offered to Retail customers (including SMEs already protected by FCA sourcebook rules) through the introduction of FCAs Consumer Duty (PS22-09) in July 2022.
Prior to these regulations, Aviva had a robust Product Governance Process in place, which continually assessed our products, both open and closed to new business, to ensure that customers continue to receive Fair Value. Our processes have been updated to ensure that they continue to meet the needs of our customers and adhere to the new regulatory requirements.
Aviva’s Fair Value Assessment Approach
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
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:
- Claims acceptance and pay-out ratios - review the value of claims paid out compared to the value of premiums received
- Commission and margin levels - to ensure these are appropriate for the service received by the customer
- Complaints - analysis of customer complaints to identify and resolve root causes, particularly where the product fails to deliver as expected
- Service delivery - to ensure service levels are in line with those we have led customers to expect
- Communications - to ensure customers continue to receive communications which are clear, transparent and timely
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.