The Financial Conduct Authority (FCA) has today published proposals to require general insurance providers to publish details of last year’s premium on renewal notices.
The proposals aim to address concerns that some consumers pay higher prices if they stay with the same insurer, particularly for a long period of time. The FCA has found evidence of low levels of consumer engagement, switching, and a lack of competition when some types of insurance policies are renewed.
Christopher Woolard, director of strategy and competition at the FCA, said: “We hope the proposals encourage more people to shop around for the best product for them. It is important that insurers give their customers the information they need to do this and ensure they’re treating their customers fairly.”
In 2014, the FCA launched a large scale randomised controlled trial with over 300,000 consumers across the UK to test reactions to different types of information provided at renewal and whether this prompted people to switch. The inclusion of last year’s premium on renewal notices had the greatest impact, prompting between 11% and 18% more people to either switch provider or negotiate a lower premium when prices sharply increase. The FCA also tested three other disclosure options:
- simplified renewal notices that reinforced key messages such as the right to cancel and switch
- sending shopping around leaflets with renewal letters
- reminders sent through different media, including email, letter and text message
In addition to requiring firms to disclose last year’s premium on renewal notices, the FCA is also proposing:
- firms to identify and specifically prompt those consumers who have renewed the same product four times or more to encourage them to engage
- guidance on how firms can improve their processes around renewals to deliver greater clarity and better outcomes for consumers
- guidance that firms maintain records of past premiums
The FCA is also reminding firms of their obligations to treat customers fairly, and to consider how their approach to renewal pricing in general, and the treatment of long-standing customers in particular, delivers fair outcomes to consumers.
The FCA is seeking feedback on its proposals by 4 March 2016.
Notes to editors
- Consultation Paper
- Occasional Paper
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK financial system, and to promote effective competition in the interests of consumers.
- Find out more information about the FCA