Fair value Framework

What is the Fair Value Framework?

From June 2022, general insurance brands are expected to evidence to the FCA that their products and services deliver fair value. They are also expected to formulate their own individual approach to measuring fair value.

The Fair Value Framework provides a universal language across the insurance industry of what fair value is, determined by the people that matter most - your customers.

By measuring your performance through the eyes of your customers, you can evidence that you are delivering the fair value experience that you customers want and expect.

You are also able to benchmark your performance against the market and your peers, allowing you to see where you need to make improvements and formulate a plan ahead of FCA intervention.

But that's not all. By understanding and successfully delivering the ultimate fair value experience according to you customers, you have the opportunity to generate positive business outcomes. This is your chance to increase retention, improve brand perception, and increase recommendations - allowing you to compete on more than just price.

How does it work?

The framework is built on a foundation of extensive research that establishes the customer perception of fair value, augmented with data benchmarking of product features such as APR and fees and charges.

The research sets out the 15 most important components of the customer experience an insurance brand must deliver well against for a customer to feel they have received fair value.

The research also identifies the relative importance different customer groups place on the various components, as well as ranking insurers’ performance against them.

How can it help me?

The Fair Value Framework allows you to truly understand what fair value means to your customers and deliver an experience that meets their expectations.

In addition, and most crucially, you will be able to evidence your successful delivery of fair value - or alternatively, a thorough understanding of where improvements need to be made - to the FCA.

With a view of where you sit in the market and against your peers, you can identify a clear set of actions that allow you to compete on more than just price.

Fair value: The danger of marking your own homework

At the end of May, the FCA published its rules resulting from the consultation on general insurance pricing practices. To help you respond to the challenge ahead, our line up of expert panellists unpicked the FCA's freshly published rules and help you establish your first steps regarding implementation.

Our host, Catherine Carey, was joined by guest panellists James Yerkess and Colin Robertson from HAL Consulting - both experts in fair value implementation - and Consumer Intelligence CEO, Ian Hughes to unpick the FCA's freshly published rules and help establish the first steps of fair value implementation.

Fair Value: Navigating the Future with the FCA

Kate Collyer, Chief Economist and Interim Director of Competition at the FCA, joined us to explore the points laid out in the General Insurance Pricing Practices Market Study, and discover what these mean in terms of both expectations, outcomes, next steps and the future of the general insurance industry.

This session covered what is meant by the FCA's general insurance fair value measures, what a firm's role is in relation to fairness, and what fair value looks like in a digital age, touching on key issues such as product governance and reporting requirements.

How else can we help you?

By combining the Fair Value Framework service with our complementary Fair Value Comparison service, we can provide you with greater assurance and evidence that your approach to PS 21/5 is compliant. Together, the Fair Value Framework and Fair Value Comparison will help you understand if your response is commercially proportionate, and whether you are likely to be disadvantaged.

Fair Value Comparison

The Fair Value Comparison is designed to help insurance brands get ahead of the game by establishing how they compare to their peers and identifying where improvements need to be made ahead of FCA intervention.