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IFoA calls for consumer fairness in general insurance pricing

Open-access content Tuesday 22nd June 2021
IFoA calls for consumer fairness in general insurance pricing

The Institute and Faculty of Actuaries (IFoA) has called for an increased focus on consumer fairness when pricing home and motor insurance products in the UK.

In a new report, the IFoA explains how the education syllabus and professional standards which support actuaries involved in pricing do not have a sufficient focus on consumer fairness. 

Given the increasingly complex use of data and models, it calls for continued efforts to ensure actuarial standards and education keeps pace.

Although pricing is not the sole domain of actuaries, the report explains how they can have a direct influence on customer outcomes, either in “coal-face” technical roles or through influencing roles in management or oversight. 

The IFoA said that actuaries should seek to use their skills in a way that acts in the public interest for both insurers and customers looking for insurance cover, balancing commercial outcomes with consumer fairness.

This comes after the Financial Conduct Authority (FCA) last month confirmed new rules for home and motor insurance that will ensure renewal quotes are not more expensive than they would be for new customers.

“Actuaries, alongside all financial service professionals, have an important role to play in promoting the principle of customer fairness,” said Neil Buckley, lay chair of the IFoA Regulation Board.

“The insurance industry will currently be considering how best to implement the recently announced measures from the FCA on general insurance pricing practices. 

“Actuaries and other technical specialists can support in this area with clear communication and transparency around their work.”

The report is the second thematic review undertaken as part of  the IFoA's Actuarial Monitoring Scheme, highlighting its commitment to independently review key areas of work where actuaries have significant involvement and influence. 

Recommendations from these reviews are intended for a range of stakeholders, however, the findings are also used to shape the IFoA's own standards, guidance and education to ensure it remains relevant.

“For actuaries, the focus is on existing professional standards, engagement with new FCA regulations, and appropriately balancing commercial drivers and customer fairness,” said Alan Marshall, IFoA review actuary and lead on the latest report.

“In terms of regulation, the IFoA and Financial Reporting Council should consider areas where additional guidance on standards is necessary. Technical actuarial standards should be reviewed, particularly in relation to data science and machine learning techniques.

“Finally, the IFoA’s pre-qualification syllabus covering GI pricing should be reviewed. We will be engaging with our members, with relevant regulators and within our own organisation to consider next steps as we take these recommendations forward.”

 

Image credit: iStock

Author: Chris Seekings

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