The Financial Conduct Authority has issued a warning to insurance providers to ensure their products are providing fair value to customers, under Consumer Duty.
In a letter sent to all insurance firms, the regulator warned that firms could face further action if they fail to do so.
It comes as the FCA said its latest insurance Value Measures Data had revealed potential concerns over the value of Guaranteed Asset Protection (GAP) products to customers. GAP insurance covers the difference between a vehicle’s purchase price and its current market value.
According to the FCA, only 6% of the amount customers pay in GAP insurance premiums is paid out in claims. In contrast, the watchdog said it had seen examples of some firms paying out up to 70% of the value of insurance premiums in commission to parties in the distribution chain such as motor dealerships.
The FCA has given GAP insurance product manufacturers a three month ultimatum to take action to prove customers are getting a fair deal.
Matt Brewis, director of insurance at the FCA, said its crackdown on insurance providers was an “early signal” of the work it would be pursuing under the Consumer Duty.
“Customers should be reassured that we’re in their corner and are taking action where we see poor value being provided. If the firms are unable to prove they’re providing fair value to their customers, they should expect further action from the regulator,” said Brewis.
