Consultation outcome

Civil Liability Act report on savings provision: consultation on implementing regulations

Updated 31 October 2019

1. Introduction

The Civil Liability Act 2018 (the act), which received Royal Assent on 20 December 2018, reforms the system for whiplash claims and the framework for the discount rate for personal injuries claims. Together, the reforms should result in benefits for consumers and taxpayers. 86% of the Association of British Insurers’ members engaged in UK motor and liability business committed publicly to passing on to customers cost benefits arising from reforms to both low value personal injury claims and to the Personal Injury Discount Rate (PIDR).

During debates in the House of Lords, concerns were raised about whether insurers would stand by the public commitments to pass on benefits from these reforms to consumers. While the government believes that the highly competitive nature of the motor insurance market will mean that insurers will pass on savings to consumers, the government recognised and understood the concerns raised by Peers.

Therefore, at Committee stage in the House of Commons, the government brought forward an amendment to provide an effective means of assessing whether the public commitment made by the insurance sector had been delivered. The aim of this amendment was to enable insurers to demonstrate whether savings had been passed on to consumers and thereby hold the industry to account in a way that is appropriate given the commercial sensitivities associated with this type of information. This amendment was accepted and forms part of the act.

The act therefore imposes a new statutory requirement on insurers to provide information to the Financial Conduct Authority (FCA) about claims costs and premium prices, as well as what they might have expected these figures to be, had the act not been passed. This will enable the Treasury, with the help of the FCA, to fulfil obligations placed on it by the act to lay a report before Parliament which assesses whether policy holders have benefited from any savings made by insurers as a result of the reforms of the act.

During the Consideration of Commons Amendments stage in the House of Lords, the government confirmed its intention to make regulations which set out the detail of the new requirements placed on insurers and the role of the FCA. The draft of these regulations is the focus of this technical consultation.

The draft regulations in Annex A set out the specific information required and the expected methods of calculating this information. This consultation document sets out the government’s suggested approach to obtaining the information necessary for the government to make a reasoned assessment of whether insurers have passed on savings to their customers, and invites comments on this proposed approach and draft regulations.

2. Draft regulations

This chapter sets out the proposed approach to requiring insurers to provide certain information to the FCA. Information should be provided to the FCA on a one-off basis, delivered by 1 November 2023, for each of the three years of the reporting period. The government also expects that insurers who have already priced in some changes in anticipation of the act receiving Royal Assent will want to demonstrate this, and may gather information for a full year or more before the start of the reporting period in April 2020. In practice, we therefore expect firms will gather the relevant information for the financial years of 1 April to 31 March of 2018-19, 2019-20, 2020-21, 2021-22, and 2022-23.

2.1 Introductory provisions

As set out above, these regulations will introduce requirements on insurers. The government does not want to place undue burdens on firms, so proposes to limit the firms that will be in scope of these requirements. Insurers who issue third party personal injury insurance policies (we expect this will be predominantly motor insurance policies) to individuals domiciled in England and Wales fall within the scope of these regulations unless the number of policies sold falls below the proposed threshold.

We propose that these regulations will apply to insurers that have sold more than 10,000 relevant third party personal injury insurance policies in any full year of the report period. This limit is intended to reflect the government’s intention that the vast majority of the market will be captured by these new requirements. Using the metric of policies sold is intended to enable firms to self-determine whether they are bound by the statutory requirement to provide information to the FCA. We expect firms to declare whether they are in scope and have sold over 10,000 relevant policies and notify the FCA without delay when these conditions are met. If an insurer has met these conditions in one of the report years, but has sold fewer than 10,000 relevant policies in one or more of the report years, it will not need to provide the full information in the years it does not meet the threshold. Instead, it may provide the FCA with written confirmation that it is not within scope of the requirement for that year. They will need to do this for each year of the report period in which the conditions are not met. New entrants to the market will need to provide information for each of the years they are in scope, or confirm to the FCA that they do not meet the threshold.

Question 1

Do you agree with the overall approach of providing a minimum threshold in order to limit the number of firms ultimately in scope?

Question 2

Do you agree that relevant policies sold is an appropriate metric?

Question 3

Do you agree that 10,000 relevant policies sold is an appropriate limit? If not, is there a figure you think would be appropriate?

Question 4

Do you agree with the approach taken to allow firms to self-determine whether they meet the conditions to be in scope of the reporting requirements, and to declare to the FCA which report years they are in scope?

Question 5

Do you agree that the SI in Annex A achieves the aim of exempting insurers who fall below the limit from the reporting requirement, except providing confirmation to this effect to the FCA?

2.2 Information to be provided by insurers

Information about claims costs and premiums

Insurers will be required to provide information to the FCA, which will collate, store and anonymise this data before sharing it with the Treasury. This information should be audited by a qualified auditor and be accompanied by a statement to verify this. The information should be gathered for each of the three years of the reporting period, to be provided to the FCA in one return, by 1 November 2023. Insurers should provide information about third party personal injury insurance policies sold to customers who are ordinarily resident in England and Wales. Where costs figures are provided these should be gross of reinsurance, legal costs and so on unless otherwise specified.

The government proposes that for each of the three years in the report period, the information provided to the FCA must include audited figures for:

• the total amount paid by an insurer to settle personal injury claims brought by third parties, where the amount of damages is governed by the law of England and Wales

• the mean of the amounts paid by an insurer during the reporting year for these settlements

• these amounts in separate totals in respect of claims with a settlement value:

a) up to and including £100,000

b) in excess of £100,000

• total premium income from relevant policies where the cover starts in the reporting year

• the mean premium amount charged by the insurer for those policies

• the total amount of these premiums which is calculated by the insurer as the technical price, which excludes optimisation and market pricing factors (defined further in the SI)

Additionally, insurers must notify the FCA of the details of the person who has carried out the audit for each reporting year to which the information relates.

After being collated and anonymised by the FCA, this information will be used by the government to assess trends and to help make a judgment on whether the market as a whole has passed savings on to their customers. Requiring firms to provide totals split into bands relating to settlement value is intended to provide a view of how the PIDR reforms have impacted larger settlements, and how whiplash reforms have impacted smaller settlements.

Question 6

Do you agree with the overall approach to requiring information from insurers?

Question 7

Do you agree with the approach to require totals to be separated with respect to settlement value? If so, is a settlement value of £100,000 appropriate?

Question 8

Does the SI in Annex A achieve the aim of requiring information that will enable the Treasury and the FCA to make a reasoned assessment of whether benefits arising from the act have been passed on to consumers?

To demonstrate whether savings have been passed on to consumers, the government will need to understand what the insurer might reasonably have expected figures for claims costs and premiums to be in each year of the reporting period, had the act not been passed. Firms will be required to calculate counterfactual figures for each of the following:

• total claims costs
• mean claim cost
• total premiums charged
• mean premium charged

The counterfactual calculated will need to take into account:

• the preceding two years’ reporting of that data, where available

• any costs, profit or price projections calculated in advance of the coming into force of the act which did not take account of some or all of those measures contained in the act

• any trends in the insurance market for that reporting year which could have the effect of influencing or distorting the information provided

As with information about claims costs and premiums, firms are required to have this counterfactual information audited. A qualified auditor must provide a statement verifying that the insurer has followed the appropriate methodology as set out in the SI.

Question 9

Do you agree with the approach to calculating counterfactual information? If not, do you have a view on how counterfactual information could be calculated?

Question 10

Does the SI in Annex A achieve the aim of requiring counterfactual information that is consistently calculated according to a uniformly-applied methodology? If not, what factors do you think should be taken into account to ensure a more consistent calculation of this data?

Additional information

Insurers should be capable of providing the information described above for an additional full year before the reporting period begins and may wish to provide information for up to two full years before. In practice, we expect this would mean a firm may decide to provide information for the period from 1 April 2018-20. The provision of this information may help a firm to more accurately capture the influence of the changes to the discount rate.

To assist the Treasury in making an assessment of whether insurers have passed savings on, a relevant insurer may – additionally – elect to provide any other information which is, in the insurer’s opinion, relevant to the aim of assessing whether benefits from savings made from the reforms under the act have been passed on to customers. We anticipate that this may include trends in the market generally, and specific elements such as an event which distorts the data for a specific insurer’s business in any year.

Question 11

Do you agree with the proposed approach to enable firms to provide additional information if they choose?

Question 12

Does the SI in Annex A meet the aim of allowing firms to include this information if they choose?

Insurance mediation and reinsurance

The regulations will require that insurers note in their return to the FCA whether any insurance intermediaries are acting in relation to their policies. The insurer must disclose what proportion of the gross written premium of relevant third party personal injury policies of insurance is so affected, and intermediaries’ costs.

If any of the information about claims costs or premium prices includes a reinsurance premium, firms should also disclose the amount of reinsurance premium paid and the proportion of the total figure which is made up by the reinsurance premium in each case.

Question 13

Do you agree with the proposed approach to requiring insurers to disclose information about intermediary costs and fees, and information about reinsurance premiums?

Provision of information date

The government will require that insurers provide information to the FCA by 1 November 2023 at the latest, six months from the end of the report period. This information must be clear, concise, and adhere to the specified format. For example, the FCA may require that firms provide information in a web form.

Question 14

Do you agree that the 1 November 2023 is sufficient time to collect information and provide to FCA?

3. The role of the Financial Conduct Authority

The role of the FCA in assisting the government and collecting information is not under consultation. The FCA will encourage the firms under their supervision that it understands to be within scope to comply with the requirements set out in the act and the requirements provided for in the implementing regulations under consultation.

In practice, we expect that the FCA will follow up with firms that do not provide the relevant information within the timeframe set out in the draft SI. It will not act in relation to the level of savings passed, or not passed, to an insurer’s customers. The FCA will address non-compliance with these regulations using the tools which are available to it. Read the FCA’s approach.

The FCA will collate and anonymise data they receive from firms, including narrative information that firms choose to provide, and convey this to the Treasury. The FCA and the Treasury will agree their processes for information sharing and the other assistance the FCA will provide.

4. Consultation questions

Question 1

Do you agree with the overall approach of providing a minimum threshold in order to limit the number of firms ultimately in scope?

Question 2

Do you agree that relevant policies sold is an appropriate metric?

Question 3

Do you agree that 10,000 relevant policies sold is an appropriate limit? If not, is there a figure you think would be appropriate?

Question 4

Do you agree with the approach taken to allow firms to self-determine whether they meet the conditions to be in scope of the reporting requirements, and to declare to the FCA which report years they are in scope?

Question 5

Do you agree that the SI in Annex A achieves the aim of exempting insurers who fall below the limit from the reporting requirement, except providing confirmation to this effect to the FCA?

Question 6

Do you agree with the overall approach to requiring information from insurers?

Question 7

Do you agree with the approach to require totals to be separated with respect to settlement value? If so, is a settlement value of £100,000 appropriate?

Question 8

Does the SI in Annex A achieve the aim of requiring information that will enable the Treasury and the FCA to make a reasoned assessment of whether benefits arising from the act have been passed on to consumers?

Question 9

Do you agree with the approach to calculating counterfactual information? If not, do you have a view on how counterfactual information could be calculated?

Question 10

Does the SI in Annex A achieve the aim of requiring counterfactual information that is consistently calculated according to a uniformly-applied methodology? If not, what factors do you think should be taken into account to ensure a more consistent calculation of this data?

Question 11

Do you agree with the proposed approach to enable firms to provide additional information if they choose?

Question 12

Does the SI in Annex A meet the aim of allowing firms to include this information if they choose?

Question 13

Do you agree with the proposed approach to requiring insurers to disclose information about intermediary costs and fees, and information about reinsurance premiums?

Question 14

Do you agree that the 1 November 2023 is sufficient time to collect information and provide to FCA?

5. How to respond and data protection

Responses to the consultation questions are requested by 3 May 2019. The government cannot guarantee that responses received after this date will be considered.

Responses can be sent by email to: CivilLiabilityAct@HMTreasury.gov.uk

Alternatively, they can be posted to:

Financial Services Group, 1 Red
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ

When responding, please state whether you are doing so as an individual or representing the views of an organisation. If you are responding on behalf of an organisation, please make clear who the organisation represents and, where applicable, how the views of members were assembled.

5.1 HM Treasury Consultations – Processing of Personal Data

This notice sets out how HM Treasury will use your personal data for the purposes of this consultation and explains your rights under the General Data Protection Regulation (GDPR) and the Data Protection Act 2018 (DPA).

Your data (Data Subject Categories)

The personal information relates to you as either a member of the public, parliamentarians, and representatives of organisations or companies.

The data we collect (Data Categories)

Information may include your name, address, email address, job title, and employer of the correspondent, as well as your opinions. It is possible that you will volunteer additional identifying information about themselves or third parties.

Legal basis of processing

The processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in HM Treasury. For the purpose of this consultation the task is consulting on departmental policies or proposals or obtaining opinion data in order to develop good effective government policies.

Special categories data

Any of the categories of special category data may be processed if such data is volunteered by the respondent.

Legal basis for processing special category data

Where special category data is volunteered by you (the data subject), the legal basis relied upon for processing it is: the processing is necessary for reasons of substantial public interest for the exercise of a function of the Crown, a Minister of the Crown, or a government department. This function is consulting on departmental policies or proposals, or obtaining opinion data, to develop good effective policies.

Purpose

The personal information is processed for the purpose of obtaining the opinions of members of the public and representatives of organisations and companies, about departmental policies, proposals, or generally to obtain public opinion data on an issue of public interest.

Who we share your responses with

Information provided in response to a consultation may be published or disclosed in accordance with the access to information regimes. These are primarily the Freedom of Information Act 2000 (FOIA), the Data Protection Act 2018 (DPA) and the Environmental Information Regulations 2004 (EIR).

If you want the information that you provide to be treated as confidential, please be aware that, under the FOIA, there is a statutory Code of Practice with which public authorities must comply and which deals with, amongst other things, obligations of confidence.

In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on HM Treasury. Where someone submits special category personal data or personal data about third parties, we will endeavour to delete that data before publication takes place.

Where information about respondents is not published, it may be shared with officials within other public bodies involved in this consultation process to assist us in developing the policies to which it relates. Examples of these public bodies.

As the personal information is stored on our IT infrastructure, it will be accessible to our IT contractor, NTT. NTT will only process this data for our purposes and in fulfilment with the contractual obligations they have with us.

How long we will hold your data (Retention)

Personal information in responses to consultations will generally be published and therefore retained indefinitely as a historic record under the Public Records Act 1958.

Personal information in responses that is not published will be retained for three calendar years after the consultation has concluded.

Your rights

• you have the right to request information about how your personal data are processed and to request a copy of that personal data

• you have the right to request that any inaccuracies in your personal data are rectified without delay

• you have the right to request that your personal data are erased if there is no longer a justification for them to be processed

• you have the right, in certain circumstances (for example, where accuracy is contested), to request that the processing of your personal data is restricted

• you have the right to object to the processing of your personal data where it is processed for direct marketing purposes

• you have the right to data portability, which allows your data to be copied or transferred from one IT environment to another

How to submit a Data Subject Access Request (DSAR)

To request access to personal data that HM Treasury holds about you, contact:

HM Treasury Data Protection Unit
G11 Orange
1 Horse Guards Road
London
SW1A 2HQ

dsar@hmtreasury.gov.uk

Complaints

If you have any concerns about the use of your personal data, please contact us via this mailbox: privacy@hmtreasury.gov.uk.

If we are unable to address your concerns to your satisfaction, you can make a complaint to the Information Commissioner, the UK’s independent regulator for data protection. The Information Commissioner can be contacted at:

Information Commissioner's Office
Wycliffe House
Water Lane
Wilmslow
Cheshire
SK9 5AF

0303 123 1113

casework@ico.org.uk

Any complaint to the Information Commissioner is without prejudice to your right to seek redress through the courts.

Contact details

The data controller for any personal data collected as part of this consultation is HM Treasury, the contact details for which are:

HM Treasury
1 Horse Guards Road
London
SW1A 2HQ

020 7270 5000

public.enquiries@hmtreasury.gov.uk

The contact details for HM Treasury’s Data Protection Officer (DPO) are:

The Data Protection Officer
Corporate Governance and Risk Assurance Team
Area 2/15
1 Horse Guards Road
London
SW1A 2HQ

privacy@hmtreasury.gov.uk