How does ABACUS comply with the PROD 4 Requirements of PS21/5?
Under PROD 4.2 ABACUS are considered to be a product co-manufacturer or just a distributor dependant upon the agreement in place with the Insurer. Where we are a co-manufacturer the Insurer has agreed to take responsibility for the required reporting to the FCA.
Our Non-Investment Insurance Products Include:
- Residential Let Property
- Unoccupied Residential Property
- UK Holiday Homes
- Terrorism
- Commercial Let Property
- Unoccupied Commercial Property
- Residential Let Legal Protection
- Portfolios
As a distributor of the above non-investment insurance products, in accordance with PROD 4.2.14AR, we have given due consideration to:
The value of the core insurance products
We fully support the requirements of PS21/5 and the IDD, to ensure our customers receive good value and to keep our customers’ best interest at the heart of what we do, always treating our customers fairly.
The value of any additional products (including retail premium finance)
We will only offer additional products where the client does not already have cover in force. In the case of retail premium finance, this is not provided by us. However, we are aware that others in the distribution chain do offer retail premium finance, and their remuneration in this regard, forms part of our value considerations.
The overall price of the package to the customer, considering our proposed distribution arrangements
We have undertaken and documented an exercise requesting remuneration arrangements for all brokers that we may transact business with as part of a distribution chain. This exercise will be repeated regularly to ensure that the distribution chain does not adversely impact on the value clients receive.
We consider the fair value of the products we offer by using our extensive market knowledge: we are confident from the claims ratio data available to us, that these products offer fair value based upon our experience of placing business with the underwriters of these products. We are aware of their claims service, and we monitor closely the way claims are dealt with, thus satisfying ourselves that these products offer fair value to our customer.
Our approach to measuring fair value is reviewed every twelve months. In accordance with PROD 4.5.7, we have undertaken an assessment of value in respect of the products being offered as part of a distribution chain. In respect of the products we distribute, we have put in place adequate arrangements to understand: 1) The characteristics of each insurance product; and 2) The identified target market of each insurance product. We have carried out a PROD assessment on each available product, which includes:
- The needs of the target market
- Product testing
- Regular monitoring and review of each product
- Where there has been a significant change or amendment to the product, we have put the amended product through our PROD assessment
- Consideration of the charging and fee structure for each product
- Our rationale regarding our choice of distribution chain
- Our approval process identifying whether each product provides fair value to customers in the target market, including whether it will continue to do so for a reasonably foreseeable period, considering the price model we use to calculate the risk premium for: – The initial policy term – Any future renewal
- Obtaining the appropriate information on product value and governance from the product manufacturer
- The charging structure of the product including examination of whether the costs and charges are compatible with how useful the product is to consumers and the transparency of costs and charges.
How do we assess that this product offers Fair Value to the end Customer?
We produce monthly M.I. reports that are reviewed at Board Level to ensure this product offers Fair Value. The M.I. that is reviewed monthly is as follows:
- New Business Income
- Renewal Retention Rates
- Loss Ratios
- Claims reviews
- New Business Conversion Rates
- Discounted Cases
- Fees Charged
- End Broker Finance APRs