Product Oversight & Governance Fair Value

Fair Value Governance Framework

At T&R Direct Limited we endeavour to achieve the best possible outcomes for our clients whilst demonstrating complete compliance with regulatory requirements. 

Therefore, T&R Direct Ltd has introduced this Fair Value Framework, working with all our provider partners aiming to ensure that products available to our clients are in-line with regulatory guidance by offering true, ongoing value to the end client. 

As part of our framework, we will endeavour to regularly request information from our provider partners to ensure clarity on the following points:

  • All providers have a Fair Value Framework or equivalent in place
  • Every product available offers good value for the client
  • Providers monitor the value of their products on an ongoing basis
  • Products are appropriate for the needs of the target audience
  • New and amended products are subject to the provider’s product approval process and ongoing product governance

As part of this, we will also endeavour to monitor the premiums available through our providers to ensure these are standard premiums and that they remain not impacted by any commercial agreements with regard to remuneration.

  • Whether we propose changes to the products or services offered by insurers or suppliers based on the assessment of trends. With some of our products we can only make suggestions as each insurer may have a different view where we are not the co-manufacturer.
  • A review of our client journey and respective dropout rates, proposing changes to positively enhance the client experience.
  • Liaising with our third-party finance providers to review APR rates to ensure that insurance premium finance offerings deliver Fair Value to our client. These are outlined in a separate Premium Finance assessment.
  • Whether price is proportionate to the product and service we offer and if changes may be required following this assessment.
  • Requesting additional information from an insurer or supplier if we believe their financial position and service to clients could impact their ability to complete claims.

Reference to Risk, Compliance and Audit Committee and external compliance support for input.

This is not an exhaustive list, and we will endeavour to adapt our assessment in line with the needs of our clients and our business.

New insurers/products and assessment

Review of proposed offering and assessment of publicly available information to review the financial strength. If we are comfortable with the product offering and financial position, we will make a recommendation internally, including the ability to assess each product using our proposed framework.

We will endeavour to review:

  • The provider’s intended target market
  • Suggested distribution strategies
  • The main features and characteristics of the products offered
  • Product risks and costs

Any circumstances which might give rise to conflicts of interest to the detriment of clients

Existing insurers/products

We will aim to complete an additional review and assessment of existing providers at least every 12 months using publicly available information that allows us to take a view on the financial strength of the partner. We will quickly react to any market conditions that may impact an insurer or supplier’s ability to service client claims.

We will also aim to review on an ongoing basis:

  • The provider’s intended target market
  • Suggested distribution strategies
  • The main features and characteristics of the products offered
  • Product risks and costs

Any circumstances which might give rise to conflicts of interest to the detriment of clients

Assessment Review

Following Fair Value assessments, the output and recommendations will be reviewed initially by the individual responsible for compliance, for completeness, and then considered by the board during their next meeting. The board will decide whether the proposed actions are reasonable and approve or amend them accordingly.

Who/When will this be assessed?

We propose to incorporate Fair Value into existing internal business meetings, with a focus on the outcomes following our assessments. 

We also propose that completed assessments are reviewed and signed off by a director with overall responsibility for compliance.

Definition and Assessment of Fair Value

T&R Direct Ltd defines benefit as a combination of the adequacy of cover against the client’s stated demands and needs, competitiveness of the price and the levels of service provided by all parties involved in supplying and servicing the product(s).

Fair Value Principles and Assessment

What are we looking for and how do we assess?

Price – Commensurate with the benefit of the product and the service we provide, we will offer clients the most competitive cover at the price available to us from our selected panel of insurers (including our commissions and fees).

Analyse the metrics for new business and renewals to display the insurer premium, broker commissions & fees.

We will also endeavour to analyse the difference in price of independently purchased add ons compared to those purchased as part of a package to ensure clients are not unfairly disadvantaged.

Product – Adequacy of the product features to meet the clients stated demands and needs in line with our Advised status.

Insurers’ documents are clear and comprehensible including for those clients who are vulnerable (for example adults with a low reading age).

Financial review of publicly available information before onboarding new insurers or suppliers and repeat at least every 2 years.

Frequency, loss ratios and rejected claims of all annual products and add on products. Quality assessment of claim handling through insurer client’s satisfaction surveys.

Review of client satisfaction surveys where available and MI from TCF assessments.

Remuneration – How the firm receives their remuneration and how we strike the balance between service and cost and how we can demonstrate that the cost to the client is proportionate to our efforts in administering and servicing the policy throughout its lifecycle.

What does it cost us to distribute the product (for example operational overheads, cost of training, improvement in controls etc.) and is the fee/level of commission proportionate to our efforts of distributing/servicing the policy?

Conduct a market review to see what other similar firms are charging in fees, so that we can benchmark our fees against the rest of the market.

Claims ratio on the books of business (i.e., does the performance of the book warrant the overall cost to clients for example: do we have a poor loss ratio?)

We aim to uphold good and orderly market practices by taking what the FCA considers to be a reasonable sum for profit (principally no more than 50%).

Client satisfaction surveys and Monthly TCF Gap Analysis

How these and MI from TCF assessments demonstrate that the client receives fair value from the products that we provide.

In relation to complaints reporting for the servicing of the client and the products, a survey would be conducted to review the value of product and that it remains of good value.

Complaints – Broker complaints on the sale, servicing, fees, and charges of the policy by product and type. 

We have in place reporting metrics by product and by type to include assessment of complaint trends allowing our products to be evaluated and where appropriate changes to the product or service proposed. Discussed and actioned at Directors meetings with RWA Business Consultancy. 

This will also include proposed changes to our online or telephone client journey.

Fair Value Assessment Document (by product)

Purpose – This document aims to assess Fair Value client impacts and any proposed changes that are required.

Products Covered Within This Document

  • Commercial combined / SME business insurance
  • Commercial package including shop, office and similar
  • Household including standard and non-standard risks, mid-high net worth and let property 
  • Liability including public, products and employers
  • Marine
  • Motor fleet
  • Motor – individual – including private car, commercial and caravans
  • Professional indemnity and directors and officers
  • Property owners – commercial property

See separate documents regarding premium finance and legal expenses products.

Fair value assessment question

Is the price presented to the client commensurate with the product and service we provide?

Commission is an average of 15 – 20% of gross premium 

No additional incentives are offered which might encourage mis-selling behaviours or cause any individual to recommend a product where it might be unsuitable and not fair value.

In addition to receiving a commission, T&R Direct Ltd usually charge a fee for administration, mid-term changes and cancellation.

These fees are set at a reasonable, market rate and details are provided to all clients prior to contract to ensure that they can make an informed decision. They are also detailed within our written communications.

Reporting metrics for new business & renewal commission/fees?

New Business and Renewal commission / fees are reported within the business and we can produce a written report to this effect.

Our fees take into account;

  • Increased regulatory costs
  • General market conditions
  • Increased administration costs
  • Reductions in insurers commissions
  • The specialist knowledge and expertise available to our clients

Add on packages and standalone add ons (including Premium Finance Agreements). Can we evidence Fair Value comparisons?

Regular reviews are completed by the product manufacturers and wholesale distributors. When applicable, liaison with Third Party Finance providers is regularly reviewed and audited.  

We have a standalone Premium Finance Fair Value assessment.

Can we evidence a financial review of the insurer/supplier (new or existing) through publicly available information and will existing insurers/suppliers will be monitored every 2 years or sooner if there is available information that requires us to complete this action?

Can we evidence a financial review of the insurer/supplier (new or existing) through publicly available information and will existing insurers/suppliers will be monitored every 2 years or sooner if there is available information that requires us to complete this action?

Does the frequency/loss ratio of the product give the client Fair Value and is there a trend for repudiated claims and are there any proposed changes?

We will endeavour to, in collaboration with the insurers, monitor claims data to identify any issues pertaining to product value, including:

  • Number of claims against anticipated frequency
  • Number and percentage of claims declined
  • Number of claims accepted, and number of claims paid upon escalation
  • Claims costs compared to distribution costs
  • Number and frequency of requests for claims complaint procedure details
  • Number of requests for cancelation by reason, including reasons relating to claims dissatisfaction
  • Average time to respond to claims
  • Average time to claims agreement
  • Average time to claims settlement
  • Claims call-centre abandonment rates

Upon review of the above the frequency/loss ratio of the product and providers outlined, the firm is satisfied that the products sold in this group demonstrate fair value to our relevant clients.

There is no trend for repudiated claims.

We do not currently recommend any proposed changes to any of the agencies we use.

Is the insurer/supplier’s documentation clear and comprehensible including for those clients who are vulnerable?

A high standard of quote documentation is presented to the client. Considering their needs, we will aim to provide a personalised recommendation which will enable all clients to make an informed choice and decide if the product is suitable for them at inception and throughout the life of the policy. 

To monitor outcomes in this area, a monthly report of cancellations by reason type is produced.

Having undertaken a review of the insurers documentation for our products and considered feedback from our clients, including MI for complaints we have received in relation to the product, we believe the documentation to be clear, transparent, not misleading and comprehensible to all clients including those who may show signs of vulnerability.

What are the main client complaint trends in relation to claims experience and are there any proposed changes?

Overall complaint numbers remain low, with each complaint assessed for root cause with appropriate retrospective action taken where necessary.

Following a review of our client journey including dropout rates, are there any observations or suggested changes?

No observation or suggested changes are necessary.

Quality assurance call checks, are the scores in line with our own internal SLAs?

Senior management regularly review call quality in line with internal Service Level Standards.  This is supported by external audits by RWA compliance.

Are client telephone call handling metrics in line with our internal SLAs?

Yes, and they’re reviewed regularly to ensure the upkeep of telephone support levels.

Can we evidence that our staff are competent in identifying and dealing with vulnerable clients?

All staff have completed a vulnerability computer-based (E-Learning) module which is refreshed annually. The module covers ways to improve how an employee can identify a vulnerable client and how to deal with the sensitivity around the situations.

Any cases where vulnerability is detected would, in the first instance, be referred to the firm’s Senior Managers to consider how to protect the client’s best interests and to ensure a fair outcome. 

Once a client’s permission has been obtained, we would record any disclosure of vulnerability on the clients’ records and communicate to other areas of the business who may deal with the policy; to reduce the need for multiple disclosures by the clients and ensure that they are supported in every way at each touch point. (sale/servicing/renewal) 

All incidents raised will be treated on a case-by-case basis to ensure flexibility for the client.

Can we evidence that our new and existing staff through induction and ongoing coaching provide Fair Value outcomes to our clients?

We have in place a robust Continuous Personal Development Programme which includes onboarding of all New Joiners and continued training and annual refresher courses for all staff as well as bespoke departmental training.

We have set out a selection of key modules for all staff to demonstrate minimum levels of competency and knowledge in specific core areas including training on fair values to clients. 

We use The Aviva Development Zone platform and internal personal development training.

Are there any changes required to our induction/coaching sessions specifically relating to Fair Value?

Staff are continuously trained with the introduction of new FCA guidelines and newly introduced products to ensure fair value is achieved.

Do the current Premium Finance APR rates offer Fair Value?

Yes, a fair value assessment has been undertaken for our existing Premium Finance arrangements (see separate document).

Annual review of the client claims journey. Are there any suggested changes and are there any client complaint trends, and if so, are there any changes being proposed to the client journey/experience?

Claims Handling responsibility lies with the agencies/claims teams assigned by the Product Manufacturer and/or Wholesaler. No client complaint trends have been identified and no suggested changes to existing claims handling procedures have been suggested.

What are the main client complaint trends regarding our retail service and are there any proposed changes to the client journey/experience?

The last Financial Conduct Authority (FCA) Retail Mediation Activities Return (RMAR) for complaints confirmed zero complaints within the reporting period. 

At present there are no identified client complaint trends regarding our retail service. 

No changes to client journey or experience have been suggested.

Actions from Fair Value Findings

Where we have identified any aspects of this product that may mean the product does not offer fair value, we have:

  • taken appropriate action to mitigate the situation and/or prevent further occurrences of any possible detriment to clients including, where appropriate, amending our distribution strategy for that product;
  • informed any relevant manufacturers promptly about any concerns we have and any action we are taking.

Summary

Having undertaken the fair value assessment T&R Direct Ltd believe that:

The level of remuneration it receives for the product that it distributes does bear a reasonable relationship to the firm’s actual costs, its contribution, level of involvement and the benefit to the client added by the firm. 

The firm provides added benefit to the client, with the service it provides, compared to the same client purchasing this product through a different distribution channel, for example: the client purchasing the product via an aggregator website. 

The firm do not have remuneration arrangements in place that give an incentive to recommend a product to clients where it either does not meet the clients needs or is not in accordance with the client’s best interest. 

Where the product is distributed as part of a package the overall price of the package is reasonable to the overall benefits provided by the package. 

The level of remuneration for which the firm is responsible for setting is reasonably reflective of the costs incurred by the firm.

Fair Value Assessment Statement

T&R Direct Ltd has completed a fair value assessment on various insurance products that it transacts and considering the findings of the assessment believe that this product on a continuing basis, offers fair value to clients in the target market.

Premium Finance

In addition to the Fair Value Assessment Statement above, we have undertaken the fair value assessment for Premium Finance provided by T&R Direct Ltd. We use Close Brothers Premium Finance and insurers own finance we believe that:

  • The level of remuneration it receives for these premium finance products do bear a reasonable relationship to the firm’s actual costs, its contribution, level of involvement and the benefit to the client added by the firm. 
  • The premium finance arrangements provide added benefit to the client, with the service it provides, compared to the same client purchasing this product through a different distribution channel, for example: the client taking out a bank loan to fund their insurance contract or paying for their premium by credit card. 
  • The premium finance arrangements help meet the needs of vulnerable clients who may struggle to borrow elsewhere. The premiums finance arrangements have appropriate forbearance/flexibility available should the client have trouble repaying the loan, defaults or fees occurred.
  • The lender’s collection practices consider the interests of our clients and ensure they are treated fairly.
  • The firm do not have remuneration arrangements in place that give an incentive to recommend these products to clients where it either does not meet the client’s needs or is not in accordance with the client’s best interest. 
  • In particular, the firm will not make any arrangements by way of remuneration, sales target or otherwise that could provide an incentive to itself or its employees to recommend a particular premium finance arrangement to a client when the insurance distributor could offer a different arrangement which would better meet the client’s needs.

Legal Expenses

In addition to the Fair Value Assessment Statement above, we have undertaken the fair value assessment for Legal Expenses products provided by T&R Direct Ltd. We use a number of providers. Having undertaken the fair value assessment T&R Direct Ltd believes that:

  • The level of remuneration it receives for this product does bear a reasonable relationship to the firm’s actual costs, its contribution, level of involvement and the benefit to the client added by the firm.
  • The firm provides added benefit to its clients, with the service it provides, compared to the same client purchasing this product through a different distribution channel, for example: the client purchasing the product via an aggregator website.
  • The firm do not have remuneration arrangements in place that give an incentive to recommend this product to clients where it either does not meet the client’s needs or is not in accordance with the client’s best interests.
  • Where the product is distributed as part of a package the overall price of the package is reasonable to the overall benefits provided by the package.
  • The level of remuneration for which the firm is responsible for setting is reasonably reflective of the costs incurred by the firm.