4299 Altus Insurance Whitepaper FINAL SPREAD - Flipbook - Page 29
With the subsequent introduction of Consumer Duty,
the regulator has been clear on what it expects – fair
outcomes for customers, and for insurers to act in
good faith. To date, no 昀椀nes have been issued for
breaches of these rules, but the regulator has already
issued a warning about current conduct.
Whether it is in regard to governance and monitoring,
price and value, or products and services, the FCA has
consistently pointed towards data, and the ability to
analyse it and share it more broadly, as the only way
to e昀昀ectively comply with the rules. The FCA wants to
see insurers with clean, relevant and easily shared
data and, ultimately, what the FCA wants, the FCA
usually gets.
...the FCA has consistently pointed
towards data, and the ability to analyse
it and share it more broadly, as the only
way to e昀昀ectively comply with the rules.
New pricing rules have undoubtedly forced insurers
– and underwriters in particular – to rethink how
they meet the principles of transparency, nondiscrimination, and treating customers fairly
throughout the underwriting process. The focus on
ensuring that vulnerable customers are treated fairly
and that prices reflect actual risk has, in part, led to
more sophisticated underwriting practices. While
these practices meet the regulatory requirement, they
place insurers under even greater pressure to access
even more data, a particularly challenging task for
companies with outdated processes and systems.
All these rules place a reporting – as well as a moral
– obligation on insurers to produce data that proves
their products provide fair value, as well as reporting
on the rationale for any product changes, evidencing
how complaints are handled and detailing internal
product governance activity. That level of reporting
requires a huge amount of extra resource to remain
compliant.
Meanwhile, the PRA’s rules around capital
requirements demand a huge amount of reporting
to satisfy the regulator, and with changes to the
Solvency II regime imminent, there is even more
disruption on the way.
The impacts of regulatory change on the underwriting process
Being able to
identify your
customer and
whether they are
vunerable
Submission
Transparent
and appropriate
questions and the
burden of proof
has shi昀琀ed from
the applicant to
the insurer
Review/
Analysis
Ensuring
responsiveness
and no
discrimination
across a portfolio
Ingestion/
Application
Alignment of
risk appetite to
ensure Solvency II
compliance
and capital
requirements
Pricing
Ensuring that prices
actually represent
perceived risk taken
on and there are
no hidden charges,
in the eyes of the
regulator
Exposure
Assessment
Providing clear
documentation
to customers of
charges and terms
Provision
of T&Cs
Quote or
Response
Ensuring that prices
and cover represent
perceived risk, and
that the product will
perform, in the eyes
of the regulator
Figure 5.1: Regulatory landscape impact on underwriting
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