Fair Value (PS21/5) Q&As
The following Q&As are intended to provide guidance to distributors on Zurich’s approach to the FCA’s fair value rules. The Q&As on ‘Product Information and Target Markets’ relate to pure protection products that are open to new customers. The Q&As on ‘Fair Value Assessments’ relate to all pure protection products.
Background
There are regulatory requirements for a manufacturer of any insurance product, such as Zurich Assurance Ltd (Zurich), to maintain, operate and review a process for approval of its products. Part of this process is for the manufacturer to ensure that the product provides fair value to customers in the target market. In order to help the manufacturer to complete a fair value assessment, the regulation also requires the manufacturer to obtain sufficient information to be able to demonstrate clearly that any distribution channels do not compromise fair value to customers in the target market.
If the manufacturer identifies that any distribution activity is detrimentally affecting the intended value of the insurance product, it must take appropriate remedial measures.
Our product approval process document details the methodology and type of metrics we consider when conducting our fair value assessments.
Product information & target markets
Details of our protection products main features and benefits can be found online in our product summaries with further details included in the Key Features and Target Market Statement documents.
The target market for each product is included inside each product specific Target Market Statement available below:
- Personal Protection target market statement (326.7 KB/PDF)
- Income Protection target market statement (138.8 KB/PDF)
- Zurich Accelerate target market statement (159.9 KB/PDF)
- Whole of Life target market statement (98.9 KB/PDF)
- Relevant Life target market statement (86.7 KB/PDF)
- Business Protection target market statement (240.4 KB/PDF)
- Business Whole of Life target market statement (91.5 KB/PDF)
- Multi-Fracture cover target market statement (102.0 KB/PDF)
The distribution strategy for each product is included inside each product specific Target Market Statement available above.
No, we have not identified any specific groups of customers in our defined target markets where our products are not expected to provide fair value.
Please see our Target Market Statements for the types of customers where the products may not be suitable based on the individual needs the customer is trying to mitigate.
No, there are no identified risks we are aware of that might cause a conflict of interest to the detriment of the customer. Our product governance process will continually monitor this.
No, customers are able to make changes directly through our web-based portal or via our contact centre.
Fair value assessments
Zurich will carry out annual assessments on all pure protection products. This assessment will take into account the nature of the product and its benefits and any limitations, the price paid by the end customer, the cost to Zurich of providing the product, the distribution channel through which the product is sold, and a review of the product performance and the type and quality of services provided to the end customer.
Where appropriate, we will group products together for the assessment where they are intended to deliver a similar outcome and the target markets are consistent.
Further details of this process are included in our product development process document which is available at:
The product development process considers whether each development is a new product or potentially a “significant adaptation” as described within the PROD rules. If the proposed development meets these definitions, then a fair value assessment will be carried out as part of the product development process.
We will share the outcome of our fair value assessments, in line with the FCA guidance, but will not be sharing the actual detail contained in the fair value assessments as these are confidential documents that we are unable to share for commercial reasons. We can confirm that our product development process already has a process in place to complete value for money assessments before we launch to market. Additionally, our proposition management process ensures that our products continue to offer value for money post sale and this process is evolving into completing annual fair value assessments on relevant product groups.
If any of our fair value assessments result in an outcome where we believe fair value is not being provided, we will engage with the relevant distribution channels to agree appropriate actions.
The fair value assessments for our protection products have the following outcomes:
| Product name | Assessment outcome | Assessment date |
|---|---|---|
| Whole of Life | Pass | June 2025 |
| Business Whole of Life | Pass | June 2025 |
| Personal Protection | Pass | August 2025 |
| Business Protection | Pass | August 2025 |
| Relevant Life | Pass | August 2025 |
| Income Protection | Pass | September 2024 |
| Income Protection (new) | Pass | March 2025 |
| Zurich Accelerate | Pass | March 2025 |
The fair value assessments carried out take account of the price paid by the end customer, the distribution channel through which the product is sold and a review of the product performance and service.
To ensure that there is not an unreasonable relationship between the price paid by the customer and the costs and risks incurred by Zurich, we have reviewed the breakdown of the premiums we charge. As part of this review, we considered the constituent parts of the premium including but not limited to expected claims, commission, operational costs and profit.
The assessment also includes a review of the performance of the product and the service provided. In order to assess this information, a review of our customer feedback and complaints was carried out to ensure the features and benefits of the product are performing as expected, to ensure the operational services are providing the level of service expected or to help identify if there is a systemic issue that might be affecting the intended value of the overall proposition.
The review includes an analysis of the reasons behind any declined claims to enable us to confirm that the product has clear claim definitions that are understood by the target market. The analysis of claims has also considered the claim handling times to ensure that the product delivers the expected customer outcomes as intended.
Zurich has sold pension, protection and investment products. None of these are open to new business. All but one category were closed to new business in 2018 or earlier. Term assurance on wealth products supporting the former SIML platform (which became Embark) were sold up until 2023.
All products are offering fair value to our customers.
We have assessed fair value using the following product groupings:
| Product type | Products |
|---|---|
| Pure Protection | Eagle Star Term sold between 2000-2008 (AIA) Eagle Star Income Protection Allied Dunbar / Zurich Income Protection Survivorship & Issue Allied Dunbar / Zurich Term Eagle Star Term Allied Dunbar / Zurich WOL and ALP Term assurance on SIML / Embark wealth products |
| None pure protection | Maximum Protection Plan Growth Protector Plan AA Over 50 Eagle Star Whole of Life City of London / Midland assurance WOL |
| Investment | Investment Bonds Regular Savings plans Endowments |
| Pensions | Personal and Occupational Pensions Executive Pensions Self Employed Pensions Kingfisher Pensions Deferred Annuities (including Esitrans, X3X and DPS) Drawdown Pensions (part of James Hay SIPP) Curtis Bank SIPP Zurich Stand alone TIPs |
Zurich’s fair value assessments will be carried out at least annually as part of our standard proposition management process for products open to new business. Where Zurich identifies a product which has the potential for a higher level of customer risk then we may carry out a fair value assessment more regularly.
Pure protection products that are closed to new business will have product reviews every 3-5 years and annual fair value assessments. All other products closed to new business will have product reviews, including value for money assessments, every 3-5 years.
Zurich must ensure distribution arrangements for its products avoid or minimise the risk of negatively impacting the fair value of the product and to do so must be able to identify the remuneration associated with the distribution arrangements.
As part of this a key consideration for Zurich is understanding the final price paid by the customer for the product manufactured by Zurich. Therefore, Zurich is keen to understand any distribution chains where additional fees may be charged to the customer which are not funded by the premium paid to Zurich for the product as these costs could affect the fair value provided.
Additionally, Zurich may ask for an explanation of the services provided through the distribution arrangements and confirmation that a distributor’s remuneration is consistent with their duty to comply with the customer’s best interests.
We regularly review our new and existing products to ensure they continue to deliver the value for money to our customers that they should provide. In the event that we found a divergence from this, the action we would take would depend on the nature of that divergence.
In the context of new business such action could include reviewing the premium levels for the product in question, reviewing the benefits offered, or closing the product altogether. Other actions could also mean reviewing the premiums through certain distribution channels to ensure that the premium paid by customers is reflective of the nature and quality of business sold through those distribution channels.
We have conducted and conduct continuous reviews of our product offering with regards to vulnerable customers to ensure our vulnerable customer approach and related processes deliver good customer outcomes.
We have a data quality management function that ensures we can accurately monitor sales performance across multiple distributors and channel. Any distributors that materially deviate from expected experience across a basket of key performance metrics will be engaged to agree an appropriate action plan to ensure that good customer outcomes are being delivered.
Distributors should consider whether their customers who are purchasing a Zurich protection product are being charged any additional fees that are not funded by the premium paid to Zurich for the product. If customers are being charged additional fees by anyone in the distribution chain, this could impact the outcome of the fair value assessment.