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Blog: Regulation, the FCA and value – how to stay on track when choosing products and partners?


RAC's Ian Lloyd discusses why breakdown insurance remains relevant today despite improvements in automotive technology and what brokers need to think about when choosing products for their customers.

With the Financial Conduct Authority’s new value measures regulation set to be the next big thing since the Insurance Distribution Directive in 2018, it’s now more important than ever for brokers to make sure their chosen products are relevant for their customers.

It was inevitable that the spotlight would land on the ancillary market given the expansion of products and underwriters in this space, alongside the recognition that some add-on products offered poor product value to customers or were not what they needed.

Good news; with nearly 33m cars on the UK’s road, breakdown insurance is still absolutely relevant in the broker space. The key consideration for brokers here is to choose their ancillary underwriter wisely as not all products and claims processes are created equal.

Robust product governance has always been important, however with the advent of claims reporting it will soon become vital as firms will be required to report and evidence how their products offer true customer value.

Over recent years the breakdown industry has continued to see consistently high volumes of breakdown claims despite changes within the automotive industry.

The volume of vehicles on UK roads is the highest it’s ever been and the types of vehicles are becoming more complex with the growing popularity of electric and hybrid technology. It’s a common myth that breakdown claims will reduce as automotive technology improves. Regardless of how reliable vehicles become, we continue to see tyre-related and battery faults as the most common causes of breakdown. For brokers, breakdown today is as relevant as ever for customers.

As well as the need for providers such as breakdown companies to ensure their products and services are suitable for motorists, there is also a responsibility for insurance brokers to choose the right provider for their customer base.

Fixing a vehicle at the roadside has the largest impact on customer experience and therefore should be a key factor when selecting a breakdown provider. Factors that deliver a positive customer outcome at point of claim now arguably hold an even greater importance in this process. 

A further consideration is the quality and clarity of product that a broker selects to offer to their customer. Is the provider offering cover that delivers to the customer’s requirements? For example, is a choice of local recovery to the nearest garage or home address really in the customer’s best interest or is a better option to provide the customer with a wider choice of resolution at point of claim?

The new FCA value measures regulation is already encouraging these sorts of questions within the insurance industry and it’s the right time to act and ensure that brokers are providing the right products to customers and, more importantly, via the most trusted leading third-party provider channels.

Ian Lloyd is head of technical product at RAC

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