FCA Pricing Practices and the New Consumer Duty
An update on our approach and actions
Many of you will likely be aware of the FCA Pricing Practices legislation and the New Consumer Duty, affecting both consumer and business insurance products. While the legislation affects PMI less than other general insurance products, we want to update you on the steps we're taking to meet the requirements.
What's the New Consumer Duty?
The FCA are introducing a new Consumer Duty in July 2023. This new duty aims to enhance the recent Pricing Practices regulations, to make sure firms offer products and services that deliver fair value to consumers.
This means that alongside the additional product governance requirements and fair value assessments, there will be further requirements to ensure consumers understand and can use their products.
Our approach and action relating to the product governance rules
We have well-established product oversight and governance controls in place to make sure we manage activities throughout the lifecycle of a product to an acceptable standard.
- For customers - we want our general insurance products to provide fair value, where customers can buy them for a fair price and use them as they would reasonably expect
- For businesses – we uphold the high reputational and conduct risk management expectations of today’s insurance firms, following legal and regulatory requirements and managing operational risks to industry standards
We’ve already made the necessary changes to our process for additional product governance requirements. You can find our revised product approval process on our website.
You’ll find our target market statements for all open products under the ‘Helping you sell’ section of this Aviva Adviser site. For example, for Healthier Solutions, you’ll find all target market statements (including those for closed products) under each product in the ‘Other documents’ section of the Document Library. Simply type in ‘target market statement’.
We'll keep you updated and share any guidance that will help you meet requirements. In the meantime, if you have any questions, please contact your Aviva Sales Manager
Our response to the pricing remedy
The new rules for home and motor products came into force on 1 January 2022. This means pricing for existing customers should be no higher than the equivalent price for new customers.
We’ve been asked if we’ll be adopting a similar policy for health insurance pricing. At the moment, the pricing remedy rules don’t apply to health or PMI products. As you’d expect, we aim to price our health products fairly, but pricing for health products is different to pricing for home and motor insurance.
For health products, we normally underwrite customers only once at the start of their policy. Generally, the more recently a customer was underwritten the less likely they are to claim. Plus, some customers may have long-running conditions – such as cancer – where we may fund treatment for many years. Because of this, we think it’s reasonable to reflect this in the price we charge. This means premiums may go up at renewal.
This is why we believe it would be inappropriate to adopt the same approach as for home and motor insurance. However, you can be sure we’ll take every care to make sure both new and existing customers receive good value.