When the FCA’s Fair Value reforms came into effect in January this year, the impact was, and still is, far reaching – much more so than many realised. However, the emphasis on brokers to show that they are providing Fair Value to customers is actually proving to be a benefit to some.
Why so? Because in a hard market, brokers who can prove that they offer real added value are at a competitive advantage when seeking to retain customers and win new ones. Now they have to prove it for regulatory reasons too, so the question becomes not whether they should, but how.
What the FCA’s Fair Value reforms entail
There has been much written about the FCA’s Fair Value reforms, but, top line, what are brokers having to do now that they did not have to do before?
Firstly, brokers need to demonstrate that they have gained the best deal for their clients, by seeking new markets and terms for renewals as they would for a new client. Many would see this as a given, but not every broker does it on every account, particularly the lower-valued ones. It takes time and costs money.
Secondly, brokers now need to demonstrate that they are offering value for money for what they do. Again, this is easy to say, but much harder to do. As with every account, there are many moving parts, from gaining competitive quotes to processing policies end-to-end, to handling mid-term adjustments and claims.
Ridiculous – FCA Fair Value broker paperwork hours revealed
In a recent article in Insurance Age (subscription needed) ‘Ridiculous – FCA Fair Value broker paperwork hours revealed’, findings were reported from the latest BIBA review of FCA Fair Value rules and how it is affecting brokers.
BIBA calculated that a small broker with 30 agencies will have to ask 10,800 questions and trudge through an extra 1,080 hours of work. A larger broker with 2,700 products faces 5,400 hours of work to get through all of the FCA paperwork.
For many UK brokers, the cost of FCA compliance is proving to be too much, with up to one in four of their full-time equivalent staff already working on compliance, according to BIBA’s 2020 manifesto.
How technology can help
The good news is that technology can mitigate the rising costs of FCA Fair Value compliance for brokers, particularly for those that are still operating with inefficient legacy systems and manual paper trail processes.
The winning brokers already know this and are gaining a competitive edge.
For instance, Novidea’s broker customers are using our cloud-native, data-driven platform to digitalise the entire insurance distribution lifecycle, providing live Management Information (MI) and an easy-to-access audit capability, which can provide fast, accurate data for every customer.
This enables them to demonstrate the actions taken to comply on every account, as well as showing a fair remuneration for services rendered, with no need for time-consuming and expensive manual re-entry processing when reporting on Fair Value to the FCA.
Faster FCA compliance at lower cost
Technology, therefore, not only brings greater efficiency to brokers’ business operations, it also enables them to quickly and easily demonstrate that they have fulfilled their obligations with each action, such as seeking alternative terms at renewal, automatically tracked for every customer.
Further, because of its ease of use, technology such as Novidea’s end-to-end broker platform can assist with selling new appropriate insurances to customers, as they are identified in the system based on what similar customers have previously purchased.
The winning brokers, therefore, can not only fulfil their duty of care, they can also effectively upsell and cross-sell to maximise their customers’ lifetime value.
Drop me a line, if you are ready to win the FCA Fair Value war, and want to discover how Novidea can help.