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FCA GI Pricing Practices - What is Assurant doing to get ready for the new rules?

We know you may have recently received a letter from the FCA titled "Enhanced Product Governance rules and update on Senior Manager Attestation
requirement" which gives the FCA's findings, concerns and actions they expect adviser firms to take when it comes to the new rules under FCA GI Pricing Practices.

We want to make your life easy when working with Assurant for your GI business so the below gives you an update on our position and what we are doing to help you.

Summary 

  • Assurant has never operated with ‘dual pricing’ and so there are no specific changes we will be making to our pricing structure. We have always believed in being clear and straightforward with both new and renewing customers. In fact, we regularly reward loyalty by applying premium discounts and premium caps.
  • There will be new Auto renewal functionality options on the QuoForma+ quote system.
  • New customer documents both for New Business and Renewals will shortly be in use, with the main change detailing auto renewal status, and how to access options to opt in or out.
  • We will shortly be publishing manufacturer (insurer) product value assessments that will show in the "Documents" section under each insurer on the Products and Insurer page on our website. These will be published once they have been received from our insurer partners.
  • Assurant is the manufacturer of the Retail Premium Finance product (RPF); a product value assessment for RPF will also be made available on the Products and Insurer page on our website under "Additional products".
  • The FCA has issued new guidance in relation to RPF (premium finance). Assurant is updating Quoforma+ to clearly display the cost of using premium finance so advisers can communicate this to their customers and comply with the new rules.
  • Assurant will be reporting all relevant RPF product data required to the FCA so advisers do not need to report any RPF data.
  • There will be an updated declaration on the Quoforma+ quote system to clarify payment options available to customers (monthly payment with Retail Premium Finance or annually paid).

 

What rule changes do adviser firms need to be aware of and what do you need to do?

Auto Renewals:

  • Customers must be given the option to opt in or out of auto renewals.
  • You must provide the options to customers at the point of sale and also explain how customers can change this option at any time.
  • Changes are being made to the Quoforma+ quote system to detail the required information that you would need to provide to customers.
  • At point of sale you will also be able to select the option the customer wishes to proceed with.

Retail Premium Finance:

  • Updated rules require you to make it clear to customers the cost of using premium finance.
  • The Quoforma+ quote system has always shown the cost of credit when using RPF, but we are making changes to clearly show the difference in costs so that you can easily communicate this when customers are selecting between monthly and annual payment options.
  • This detail will also be added to the Quote Illustration document.

Value in the distribution chain:

  • Any adviser firm trading with Assurant would be assessed as a ‘Distributor’ by the FCA in relation to Assurant’s business.
  • Whilst it is ultimately the manufacturers responsibility, the FCA requires all members of the distribution chain to assess value in the distribution chains.
  • The regulator is asking all manufacturers to review all parties' activity within any distribution chain against the level of remuneration received to ensure the customer is receiving fair value.
  • Adviser firms (and any party in the distribution chain) should consider the activities they conduct at both New business and Renewal, against the commission they receive.

New Product Governance Requirements

  • There are enhanced governance requirements for manufacturers of products which standardise the rules for products introduced before October 2018, with those introduced after the Insurance Distribution Directive came into force.
  • Assurant will be publishing manufacturer product value assessments on the Products and Insurer section on our website for all products on our panel which you distribute.

 

Are you a ‘Price setting intermediary’ and what does this mean to you?

  • The FCA has issued enhanced product governance requirements for manufacturers and also for some distributors that are deemed as ‘Price setting intermediaries’. This means where you define the final price that the customer pays.
  • When trading with Assurant, you do not price set for RPF but you may do for the main home insurance policy if you ‘commission rebate’.
  • Being a Price Setting Intermediary (PSI) carries certain obligations under the new rules. Whilst from a reporting angle the FCA has said a PSI does not need to report if they are only ‘commission rebating’, they have added that you would need to report these cases if commission rebating cases total more than 25% of your total business.
  • There are other obligations of being a PSI including providing a senior manager attestation. We would recommend that you seek guidance from your compliance teams on how this may specifically impact your firm and what you would need to do going forward.

Commission rebating:

  • If an adviser uses our commission flex tool on the Quoforma+ quote system to reduce commission and the overall price to the consumer, this will mean you are deemed a ‘price setting intermediary’ by the FCA (for clarity, this is the only situation where Assurant would assess the broker as price setting within our current trading with you). The FCA call this ‘commission rebating’.
  • If you do use our commission flex tool on the Quoforma+ quote system to ‘commission rebate’, there would be no impact of price walking at a subsequent renewal as the total commission you have set will be retained at renewal (this has always been our standard process).

Reporting data to the FCA:

  • Adviser firms are not expected to be reporting any data to the FCA in respect of any of the ‘Assurant’ products you distribute. Assurant or the panel insurers will be responsible for this.
  • The only exception to this could be where you commission rebate on more than 25% of business (see information above).

 

We hope the above information helps clarify our position and what we are doing to get ready for the new rules. We would recommend you now seek guidance from your compliance teams on how this may specifically impact your firm and what you would need to do going forward.

Thank you for your continued support, we look forward to working with you more.

 

Richard Miles
Director, Assurant Intermediary