Setting the Standard for Fair Value Compliance with RegTech

Fair value assessments require firms to carefully analyse and document the value their products deliver to consumers. This process involves gathering extensive data across the entire supply chain, which has proven both complex and resource-intensive. In a recent webinar titled “Easing the Regulatory Burden to Allow Insurers and MGAs to Prosper” industry leaders discussed the difficulties associated with fair value assessments. 

Richard Turnbull, Managing Director at Collegiate Underwriting, explained: “Fair value assessments and Consumer Duty are taking up a lot of time. But I think that good firms are already doing a lot of these processes correctly. It’s creating more work for firms that aren’t acting properly. Ultimately, all we’re asking is that you demonstrate you’re providing a good product that offers value and that your distribution network isn’t just about generating commission.” 

The FCA has highlighted that many firms have struggled with effectively identifying target markets, acquiring data from all parts of the distribution chain, and providing adequate evidence of oversight. For instance, the FCA’s review revealed that some target market statements were too broad, such as describing the target market for car insurance as “anyone who owns a car, as it’s a legal requirement.” This indicates a need for more detailed, granular assessments. 

While fair value assessments are designed to improve customer outcomes, the reality is that the process is consuming significant industry resources, with costs that could ultimately be passed on to consumers. 

Stephen Folkard, Chief Risk and Compliance Officer at The Jensen Group, highlights the scale of the issue: “We know that fair value regulations are consuming a massive amount of resources across the industry, and that cost could eventually be passed on to consumers.” 

Zoe Parsons, Marketing Manager at REG, acknowledges the industry’s efforts to comply but underscores an ongoing challenge: “One of the weaknesses identified is the data acquisition piece—collecting it across the entire supply chain. Standardising documentation is something we all need to focus on as a market.” 

Victoria Slade, Head of Sales at REG, echoes this sentiment, emphasising that the fragmented nature of insurance distribution chains makes compliance especially challenging: “Insurers and MGAs not only need to gather data from direct agencies but also from every node in the chain. Reaching every node is borderline impossible.”