Fair value assessment criteria
Zurich’s fair value assessments consider the nature of the product and its benefits and any limitations, the price paid by the end customer, the cost to us of providing the product, the distribution channel through which the product is made available, and a review of the product performance and the type and quality of services provided to the end customer.
Measures included in the fair value assessment and product review include:
- Price and value – An analysis of the premium paid by the customer and a measure of the claims ratio, commission ratio, expense ratio and profit margin.
- Product suitability – An assessment of the product and its features to ensure it continues to meet customer needs.
- Target market – An analysis of our business mix and distributor performance to confirm adherence to the target market.
- Claims analysis – a review of claims acceptance rates, unpaid claims, end-to-end claims times and individual case studies.
- Complaints analysis – a review of complaints and any systemic trends or upheld complaints.
- TNPS – Analysis of customer and distributor feedback at different customer journey touchpoints.
- Customer communications – Testing of key customer facing documents to ensure they are well understood by the customer and deliver the key messages as designed.
- Customer journey – Analysis of the end-to-end customer journey and performance metrics for different parts of the journey including underwriting, servicing and cancellation.
- Cohort analysis – A review of key indicators split by customer segment including cohorts of customers that demonstrate characteristics of vulnerability to ensure that they are receiving good outcomes.
Open products
For products open to new business, we conduct product reviews including a fair value assessment at least once a year. If we think a product has a higher level of customer risk, we might assess it more often.
Sometimes, we group similar products together for the assessment, if they’re intended to deliver a similar outcome and the target markets are consistent.
Closed products
For closed products, we conduct a product review every 3-5 years.
Closed pure protection products also get annual fair value assessments, and closed pension or investment products get value for money assessments alongside the product review.
Distributor fair value assessments
Distributors must ensure that any fees or charges paid directly to them by customers do not negatively impact the overall value for the customer.
Our assessments only include commission or fees paid to distribution partners as part of the sale or servicing of our products. If customers pay additional fees or charges directly to the distribution partner that we are unaware of, we expect the distribution partner to ensure these do not negatively impact the overall fair value assessment for the customer when conducting their own assessment.
We will periodically contact you for details regarding the remuneration associated with the distribution arrangement. This enables us to assess the ongoing value of the products we provide. We will particularly do this if we observe business processed on a nil commission basis, as this is likely to indicate that additional fees are being charged outside of the product.