Atlas Group

Customer Fair Value

Captives and protected cells have obtained diversification and extended from risk financing mechanisms to profit centres by offering affinity and embedded customer insurance. Atlas PCC also hosts cells for some of the most renowned insurtechs, insuring EU and UK customers. This shift brings consumer regulations into scope, which can be turned into opportunities to enhance customer long-term value and loyalty, and thereby sustainable growth.


Beyond Risk Financing

Captives can diversify by insuring their parent’s customers risks. For instance, captives owned by manufacturers offer extended warranties or specialised insurance coverage as add-ons when customers purchase their machines, which is particularly common for car manufacturers. Telecommunications companies sell gadget insurance as add-ons to their subscriptions. Hotel chains, airlines and travel marketplaces offer cancellation or broader travel insurance.

Captives can achieve a dual benefit. Firstly, they can diversify their revenue and risks, reducing dependency on traditional self-insurance premiums. Secondly, by offering value-added services, they can enhance customer loyalty for their group. Customers who purchase add-on insurance products from trusted brands are more likely to feel a deeper connection with those brands, leading to increased trust and repeat business.

The key to success is to ensure excellent customer experience and value. Regulatory bodies, like the UK’s Financial Conduct Authority (FCA), have set clear expectations regarding customer fair value. Captives can lead the way by exceeding regulatory expectations and differentiating their group’s offering in a crowded market.

Moreover, this focus on customer value aligns with the broader customer-centric trend. Organisations realise that the key to long-term success is to put the customer at the heart of everything they do. Captives can embrace this trend by ensuring that their add-on insurance products are designed for customers’ needs, providing genuine value and enhancing the overall customer experience.


UK Consumer Duty

Regulations often perceived as hurdles are, in fact, opportunities. The evolving regulatory expectations around consumer duty and customer fair value are not mere compliance checkboxes but are benchmarks of excellence. They provide a roadmap to deliver outstanding customer outcomes and experiences, ensuring sustainable growth and resilience.

The FCA has been at the vanguard of championing consumer duty and customer fair value. Consumer duty ensures:

  1. fair value: consumers receive fair prices and quality;
  2. suitability and treatment: consumers receive suitable products and services and receive good treatment and support;
  3. confidence: consumers have strong confidence and levels of participation in markets; and
  4. access: diverse consumer needs are met.

Value is the relationship between the amount paid by a retail customer for the product and the benefits they can reasonably expect from the product. A product provides fair value where the amount expected to be paid for the product is reasonable relative to the product’s benefits for customers in its target market. The amount expected for the product includes agreed repayments, charges, fees and any non-financial costs.

FCA’s September 2023 publication on general insurance value measures data offers invaluable insights into what constitutes fair value from a regulatory perspective, particularly around:

  • Product Value: The relationship between the price paid by the consumer and the quality of the product they receive is often demonstrated by the claims costs as a proportion of premiums received. It is not about competitive pricing but ensuring products offer genuine value in coverage, benefits, and terms.
  • Distribution Value: Distribution costs, especially commissions in standard non-advised sales, must be justified and should not erode the product’s value.

The FCA’s data-driven approach provides transparency and holds firms accountable. It offers a benchmark for firms to assess their performance in delivering value to their customers.


European Perspective

The broader European landscape is also evolving. The European Insurance and Occupational Pensions Authority (EIOPA) actively focuses on ensuring customer value. Their recent bancassurance thematic review and subsequent warning on credit protection insurance published in August 2022 highlight the importance of delivering value across all insurance products.

EIOPA is seriously concerned with high commissions and conflicts of interest, leading to products offering unfair value. EIOPA also found that some insurers had very low claims ratios, indicating that customers might not get fair value.

Captives must also be vigilant in managing and disclosing potential conflicts of interest when providing products to customers of their parent groups or where the distributor and captive have common ownership.

EIOPA emphasised the importance of robust product oversight and governance arrangements. Products must be designed to meet the target market’s needs and distributed through channels that reach the intended customers. For captives, this underscores the importance of aligning insurance offerings with the specific needs of their parent organisation’s customers.

As the regulatory landscape continues to evolve, captives that proactively prioritise customer value will be better positioned to navigate future changes. They can set themselves apart, exceeding regulatory benchmarks and showcasing their commitment to delivering exceptional customer value, enhancing their group’s reputation and customer trust.


Embracing Customer-Centric Philosophy

Adopting a customer-centric philosophy is the key to navigating this evolving regulatory landscape. Regulations, at their core, aim to ensure that customers receive fair value.

Going beyond mere compliance and striving to deliver exceptional value at every touchpoint means actively seeking customer feedback to understand their needs, preferences, and pain points to refine offerings. Customers need a clear understanding of what they are purchasing, including transparent pricing and clear communication, terms and conditions.

Technology and data analytics can also be leveraged to design innovative products that cater to evolving customer needs. Such innovation, for example, could involve using AI to enhance claims processing.

In today’s customer-centric era, organisations have a unique opportunity to redefine their value proposition. Rather than viewing regulatory expectations as mere compliance requirements, forward-thinking organisations leverage them as a strategic advantage:

  • Building Trust and Loyalty: Captives can foster deeper trust and loyalty among their group’s customer base by prioritising customer value.
  • Sustainable Growth: Captives focusing on delivering genuine value will see sustainable growth, as satisfied customers are more likely to renew their policies, purchase further products and recommend the captive’s group to others.
  • Innovation and Adaptability: Those who embrace a customer-centric approach will be better positioned to innovate and adapt to technological advancements and changing customer expectations, ensuring they remain relevant and competitive.
  • Enhanced Reputation: In today’s digital age, customer reviews and feedback can significantly impact a company’s reputation. By exceeding customer expectations, groups strengthen their reputation, attracting more business and establishing themselves as leaders.
  • Future-Proofing the Business: Regulatory landscapes will continue to evolve, and customer expectations will keep rising. By embedding customer value at the core of their operations, captives can future-proof their business, ensuring they are always ahead of the curve.


While the traditional risk financing role of captives and protected cells remains, a significant opportunity exists to expand their horizons into insuring risks of their parents’ customers. By acting as profit centres and ensuring customer fair value, captives can bring diversification, drive sustainable growth, and enhance customer loyalty for their parents. The shift towards ensuring customer fair value is not just a regulatory trend. It reflects the broader societal shift towards transparency, accountability, and customer-centricity. Embracing regulatory lessons and genuinely prioritising customer value, will help ensure long-term success.