GI Value Measures – Are you Building a House of Cards?
It’s February, and to many firms looking at their regulatory reporting timetable that means the annual GI Value Measures report is due at the end of the month for those with personal lines products. Last year (and the previous year) this reporting posed a significant challenge to many, market intelligence suggests the challenges are the same this year.
Since the announcement of the final rules on GI Value Measures in September 2020, firms, underwriters and compliance teams have looked at the requirement with a sense of dismay, with Compliance teams suddenly becoming accountable for numbers not words, and Underwriting teams being held to account over numbers they cannot explain, or which they feel are calculated incorrectly. In fact, it’s not uncommon to see Actuaries and Underwriters shaking their heads in disbelief at the calculation for % paid out in claims of the premium per calendar year, instead of year of account or financial year.
There is no doubt that GI Value Measures reporting has brought benefits to the consumer market, with the regulator’s intervention on GAP via their current preferred tool of the Voluntary Request (VREQ) a prime example of improving value to the consumer. But with the third return due at the end of February, many firms are still struggling to implement GI Value Measure reporting accurately and efficiently.
The challenge starts with data production in MGA’s and TPA’s where experience tells us, firms do not always understand the requirements, and this can result in production of data which can range from nearly accurate to wildly inaccurate. Next comes the collation phase, where typical compliance functions aggregate and/or join data from multiple sources to meet the regulatory obligation. Many of these functions lack the confidence or expertise to challenge or interrogate the numbers, let alone the experience to roll it up correctly. Often, data from internal teams can be incorrect, despite clear requests and assurances that the data provided meets the brief, the requested calculations are not followed because they do not follow standard business practices. Consistency across classes of business approach is often lacking.
The result is inaccurate submissions completed on a best endeavours basis. Whilst sub optimal, inaccuracies are then amplified by the Underwriting and Product Governance functions during Product and Fair Value Assessments. This information is then used as part of the Product Governance and Oversight Framework before going on to be reported in the Annual Consumer Duty Board report. Inaccurate source data, collated poorly, analysed at face value and subsequently used to build action plans for the Board often leads to inaccurate conclusions in regard to the ‘good outcomes’ retail customers receive and results in inaccurate Board action plans.
Over the last 3 years, GreenKite have assisted a number of Insurers and MGA’s with their Value Measures accuracy and understanding, improving the quality of their Product and Fair Value Assessments, and generating market leading Consumer Duty Board Reports. Even if you are mid-way through your data collation activity, it’s not too late to get additional support to undertake conduct assurance activity on your processes and data. Ultimately, your Board do not want to be attesting to conclusions built on a house of cards and there is still time to get this right – even if it requires a resubmission, So, if you think your business could benefit from assurance and technical support in this area, please get in touch, and let GreenKite help you drive improvements in Conduct data and reporting.
For more information, please reach out to Marcus Tompson at [email protected].
