General Insurance value measures

In January, the Financial Conduct Authority published “scorecards” for 38 insurers with the aim of informing consumer organisations which add-ons deliver the best value. The scorecards covered four products: home insurance, home emergency, personal accident and key cover, for both stand-alone and add-on products.


The scorecards show :
- the claims frequency ratio against policy volumes.
- the percentage of notified claims that are accepted, and
- the average sum paid out

Personal accident has a reasonable acceptance rate but the claims frequency is very low, with the majority of insurers disclosing sales of thousands of polices to yield a single claim. Average pay-outs varied greatly between insurers. This is probably due to products having different levels of indemnity, which would have been reflected in the premium charged. Consumers may not appreciate the impact that differently-priced product features have on the scorecard outcomes.
Unlike a “pure cash” product such as personal accident, home emergency is a service-led product which promises convenience to policyholders around the clock. The cost of delivering the product includes not only the charges paid to contractors, but the operational costs of a call centre and maintaining the contractor network. Policyholders enjoy peace of mind and they value the convenience of a single call to reach help from a quality-checked contractor. 

Home Emergency scores
•  The claims frequency for stand-alone home emergency was greater than for most add-ons, which would be reflected in the premium.
•  Add-on frequencies varied with the mode
figure being 2.5% - 4.9%. Only one insurer disclosed a lower frequency than this with four having higher frequencies.
•  The claims acceptance rate was over 90% for most insurers.
•  Average pay-outs were low as insurers engage contractors at significantly lower rates than an uninsured customer would pay, especially if an emergency same-day service is sought by the customer.
•  The scorecard does not reflect what an uninsured consumer would pay to get help for their emergency.
You can see the data yourself:
https://www.fca.org.uk/publication/data/gi-value-measures-data-august-2016.xls
We maintain that home emergency add-ons provide great value to consumers compared to the premiums paid for stand-alone products.  Home emergency delivers reliable, rapid attendance 24/7 by a quality-assured contractor. These aspects are valued by the consumer despite being invisible to scorecard-readers, so it is important to ensure that customers are made fully aware of the benefits when buying home emergency insurance.