The Financial Services Authority (FSA) has introduced the "Regulation Governing Insurance Loss Assessment and Estimation Activities" to elevate service quality, strengthen policyholder protections, and enforce transparency, fairness, and impartiality across the insurance sector.
Part of a broader effort to improve supervision of supporting insurance activities, the regulation establishes a comprehensive operational framework for assessing risks prior to contract sign-off and evaluating losses when claims arise.
It seeks to enhance the reliability of insurance assessment and loss estimation activities and improve the quality of technical reports used by insurance and reinsurance companies in assessing risks and claims and making decisions related to insurance coverage and compensation.
It sets out the technical and professional requirements to be met by licensed entities, as well as the rules governing their activities and obligations to insurance companies and policyholders, ensuring that such activities are conducted efficiently, independently and impartially.
Licensing
The regulation also sets out requirements and controls governing the licensing of insurance loss assessment and estimation activities, requiring prior authorisation from the FSA before conducting such activities and prohibiting insurance companies from dealing with unlicensed entities. These requirements include legal, financial and professional conditions, as well as competency and experience requirements for personnel engaged in the activity, thereby enhancing the quality and reliability of assessment and estimation services.
The regulation further governs the duration and renewal of licences and the obligations of licensed entities, while requiring compliance with professional standards and the principles of integrity, independence and impartiality, as well as the confidentiality of data and information.
Loss assessment activity
The new rules cover the mechanism for assessing risks and estimating insurance losses and set out the professional duties of licensed entities throughout the various stages of assessment and estimation. These include preparing accurate and comprehensive technical reports based on clear professional standards, reviewing claims, and verifying the causes and extent of losses, thereby enhancing the accuracy and reliability of assessments and safeguarding the rights of all parties to the insurance relationship. This, in turn, strengthens the independence of assessment and loss estimation activities through controls designed to mitigate conflicts of interest and ensure objective and impartial assessments.