FSA outlines claims data disclosure plans for insurance firms

The FSA has published a discussion paper about 'transparency' (34-page / 1.72MB PDF). The regulator said that it could require insurance companies to be more open about the rate that they pay out on claims made by customers for "add-on and non-core products such as warranty, home emergency, identity theft, and mobile phone insurance".

The FSA said that the disclosure of information, such as the claims made per customer, the percentage of successful claims that were made "following an initial contact", and a ratio detailing the premiums charged set against the payouts made for each relevant product, could drive greater competition in the market.

"Publishing information about which firms pay out on insurance products could help to address concerns that insurers seek to avoid paying out," the FSA said in its discussion paper. "It would send a signal to the market about the relative performance of both firms and sub-sectors of the insurance market. Publishing this data in a way that consumers would understand and pay attention to, could improve their choices of insurance providers and help them to avoid low-value products."

"As with complaints data, intermediaries could help consumers aggregate and compare firms’ disclosures on claims. Greater focus by buyers on product value, not just price, could in turn stimulate improvements in quality from firms that rarely pay out and could make competition more effective. Done well, this work could deliver real transparency about the genuine value or otherwise of products, which would tell a really compelling story for consumers," it added.

The FSA said that the potential for "negative publicity" for firms whose data shows up poorly compared to rivals could provide "an incentive for better firm behaviour".

It said that the specific ways firms would have "provide and disseminate the information" would "need to be considered and tested carefully" before new rules were imposed.

However, the FSA acknowledged that there would be "limitations" to what could be read from claims data it said insurance firms could be required to disclose and also said that there may be "valid reasons" why some insurance offerings "have low claims per customer", such as where firms cover "a very rare but extremely costly event".

"Consequently, we are mindful that we would only wish to present data that was sufficiently rigorous and where it would not cause unreasonable conclusions to be drawn," the regulator said.

The FSA has asked stakeholders to detail to what extent they believe the publication of claims data for insurance products would be helpful, what kind of information ought to be disclosed under such a regime and what they consider to be the benefits and drawbacks of such publication. Responses can be submitted up until 26 April.