A 2013 FCA study found that consumers were collectively overspending on their insurance policies by £108m annually, due to needless ‘add-on’ policies.

It also found poor levels of payouts on claims in certain insurance sectors, including pet, dental and identity theft cover.

Now, the FCA has proposed that insurers publish detailed information on average claim payouts, and rates of claim acceptance across all policies offered.

The FCA has suggested a number of ways to measure value for money, including a standalone monetary value of claims paid out as a percentage of premiums paid.

“We are committed to introducing a measure of value for general insurance products,” said Christopher Woolard, director of strategy and competition at the FCA.

“Consumers can struggle to assess the value for money being offered by insurance products, and their task is made harder due to commonly used terms or jargon meaning different things for different products, being used differently by different firms.

“We believe consumers in this market need to have greater transparency about what they are paying for.”

The proposals will be put to public consultation, prior to formal adoption.

The announcement has met with muted welcome. Rod Jones, insurance expert at uSwitch.com, said the proposed changes “could help consumers – who can find the insurance market complicated and confusing make better informed decisions.

“However, insurers should be able to exclude from their data instances where a claim turned out to be fraudulent, so as not to distort the payout ratios. This approach needs to be standardised across the industry, to give consumers the confidence that they are always comparing like with like,” he concluded.

Simon Penny, head of insurance at DST, said the FCA was “right to be pressing for greater transparency.”

However, he believes the FCA are making a mistake by focusing purely on value for money.

“Our research shows that cost is just one area that insurers need to be focusing on, since today’s savvy consumers are prepared to shop around and weigh up their options in a number of different areas,” Penny says.

“Twenty percent of the people we surveyed say they would switch insurers due to poor communication, and just under half consider customer service reputation when choosing a provider. Slow claims processing was also named as a top reason for changing insurers. Regulators and insurers must address all of these needs.”