Build a robust, evidenced fair value assessment process that satisfies FCA expectations under PRIN 2A and demonstrates genuine customer-centric outcomes.
Since the Consumer Duty came into force on 31 July 2023, the FCA has made clear that fair value is not a one-off pricing exercise. Firms must continuously demonstrate that products and services provide fair value relative to the price consumers pay, the benefits they receive, and the costs of delivery. For many insurance firms, this has exposed fundamental gaps in data collection, governance, and outcome measurement.
The FCA's multi-firm review published in early 2024 found that a significant proportion of firms had not embedded fair value assessments into ongoing product governance. Instead, many treated the assessment as a static compliance document rather than a living process. The regulator has signalled it will take supervisory action against firms that cannot demonstrate meaningful, evidenced assessments.
Without a structured framework, compliance teams struggle to aggregate pricing data, claims outcomes, complaints trends, and distribution costs into a coherent assessment that the board can sign off on with confidence.
An effective fair value assessment framework breaks the process into discrete, repeatable stages: data gathering, comparative analysis, outcomes testing, and board-level reporting. Each stage maps directly to the FCA's expectations under PRIN 2A.4 (price and value outcome) and the supporting guidance in FG22/5.
The framework should integrate with your existing product governance arrangements under PROD 4, ensuring that fair value is assessed at product launch, at each annual review, and whenever there is a material change in the distribution chain or claims experience.
By centralising fair value evidence in a single workflow — linking pricing models, claims ratios, complaints data, and customer research — you create an auditable trail that demonstrates compliance without relying on spreadsheets or ad hoc processes.
Follow these steps to create a fair value assessment process that meets FCA expectations and provides genuine insight into whether your products deliver value to customers.
Establish the specific metrics and thresholds you will use to assess fair value. The FCA expects firms to consider the total price paid by the customer (including all fees and charges), the nature and quality of the product, the costs of manufacturing and distribution, and the outcomes customers actually receive. Document these criteria in a formal fair value assessment methodology.
Collect pricing data, loss ratios, claims acceptance and rejection rates, average claims settlement times, complaints volumes by product, and distribution cost breakdowns. This data often sits across multiple systems — underwriting platforms, claims handlers, complaints logs, and finance. Centralising it into a single view is essential for meaningful analysis.
Compare your products against market equivalents to assess whether the price-to-benefit ratio is reasonable. Consider both the breadth of cover and the quality of the customer experience — including ease of claiming, transparency of terms, and responsiveness of service. The FCA does not require you to be the cheapest, but you must be able to justify the value proposition.
Analyse whether different customer groups experience different outcomes. Consumer Duty requires firms to consider whether certain groups — such as those who renew without shopping around, or vulnerable customers — receive fair value. Segment your data by customer tenure, acquisition channel, claims frequency, and vulnerability indicators.
For each product, produce a clear, evidenced conclusion: does the product provide fair value? If the answer is yes, document the supporting evidence. If there are concerns, document the remedial actions you will take and the timeline for implementation. Avoid vague or equivocal language — the FCA expects firms to reach a definitive view.
Ensure fair value assessments are reviewed and challenged at an appropriate level of seniority — typically the product governance committee or board. Define escalation procedures for products identified as potentially poor value, including triggers for withdrawal or repricing. Under SM&CR, a named Senior Manager should have accountability for Consumer Duty outcomes.
Fair value is not a point-in-time exercise. Establish ongoing monitoring using key indicators such as claims ratios, complaints trends, renewal pricing differentials, and customer satisfaction scores. Set review frequencies — at minimum annually, but more frequently for higher-risk products or where the market is changing rapidly.
Integrate your fair value assessment directly into your PROD 4 product governance framework. This avoids duplication, ensures consistency, and means fair value is considered as part of every product lifecycle decision — from design through to withdrawal.
The FCA expects more than just loss ratio analysis. Supplement quantitative data with qualitative evidence such as customer feedback, complaints root cause analysis, and mystery shopping results to build a complete picture of value.
While historical data is essential, your assessment should also be forward-looking. Consider anticipated changes in claims inflation, distribution costs, or regulatory requirements that could affect value in the coming period.
Under PRIN 2A.4.7, manufacturers must consider the cumulative impact of all costs in the distribution chain. Actively assess whether intermediary commissions and fees are reasonable relative to the services provided and whether they erode customer value.
Where a product is found to deliver borderline or poor value, document specific, time-bound remedial actions. The FCA will expect to see not just identification of issues, but concrete steps taken to address them.
Formal methodology covering all criteria expected by FG22/5, approved by senior management.
Pricing, claims, complaints, and distribution cost data accessible in a single view.
Clear yes/no conclusion for each product, with evidence trail and any remedial actions.
Key indicators tracked with automated alerts for threshold breaches.
Identify potential gaps in your fca compliance processes with our free self-assessment tool. Not a substitute for professional advice.
Try these related tools — no sign-up required.
Move TCF from a compliance checkbox to an operational reality — with practical frameworks for monitoring, evidencing, and improving fair customer outcomes.
fca complianceA definitive guide to meeting FCA record-keeping obligations under SYSC 9, COBS, ICOBS, and DISP — with practical retention schedules and storage recommendations.
complaints handlingMove beyond individual complaint resolution to identify and address the systemic issues driving complaint volumes across your insurance operations.
SwiftCase helps insurance firms centralise fair value evidence, automate monitoring, and produce board-ready Consumer Duty reports — all in one platform.
