General Insurance Article - IFoA supports consumer fairness in GI pricing

The professional standards and education syllabus which support actuaries involved in pricing for the UK home and motor insurance market should have an increased focus on consumer fairness. Given the increasingly complex use of data and models, there should also be continued efforts to ensure actuarial standards and education keeps pace.

 These are the key recommendations in the “Thematic Review Report. General insurance: involvement of actuaries in pricing UK home and motor insurance” published by the Institute and Faculty of Actuaries.

 Personal lines pricing is not the sole domain of actuaries – they work alongside other technical specialists to help determine appropriate insurance premiums. Depending on the structure of the organisation, ultimate responsibility and decision making on pricing may rest with non-actuaries. But actuaries can have a direct influence on customer outcomes, either in ‘coal-face’ technical roles or through influencing roles in management or oversight. They should seek to use their skills in a way that acts in the public interest for both insurers and customers looking for insurance cover, balancing commercial outcomes with consumer fairness.

 Neil Buckley, Lay Chair of the IFoA Regulation Board, said: “This report on pricing in the UK motor and home insurance market is the second Thematic Review undertaken as part of our Actuarial Monitoring Scheme. It points to the IFoA’s continued commitment to independently review key areas of work where actuaries have significant involvement and influence. Our recommendations from these reviews are intended for a range of stakeholders with members and their work at the core. However, we also use the review to carefully consider our own standards, guidance and education to ensure the IFoA remains relevant.

 “Actuaries, alongside all financial service professionals, have an important role to play in promoting the principle of customer fairness.

 The insurance industry will currently be considering how best to implement the recently announced measures from the Financial Conduct Authority (FCA) on general insurance pricing practices. Actuaries and other technical specialists can support in this area with clear communication and transparency around their work.”

 Alan Marshall, IFoA Review Actuary and lead on this Thematic Review Report, said: “We would like to thank the actuaries and organisations involved in this Thematic Review. The information and insight they provided allowed us to conduct a comprehensive and meaningful review. The report’s recommendations are aimed at our members and regulators. For actuaries, the focus is on existing professional standards, engagement with new FCA regulations and appropriately balancing commercial drivers and customer fairness.

 "In terms of regulation, the IFoA and Financial Reporting Council should consider areas where additional guidance on standards is necessary. Technical Actuarial Standards should be reviewed, particularly in relation to data science and machine learning techniques.

 Finally, the IFoA’s pre-qualification syllabus covering GI pricing should be reviewed. We will be engaging with our members, with relevant regulators and within our own organisation to consider next steps as we take these recommendations forwards.”

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