CP20/19: General insurance pricing practices market study - Consultation on Handbook changes

CP20/19
22/09/2020
Consultation closed
25/01/2021
25/01/2021
Policy Statement
Q2 2021

We are consulting on rules and guidance to implement a package of remedies to address the harms identified in the general insurance pricing practices market study.

Read CP20/19

Addendum December 2020 

We have identified an error in the code used to estimate the impact of the pricing remedy that leads to changes in estimated impacts of the package of remedies. These changes relate to both the estimated consumer savings and level of switching under the remedies. The estimated benefits to consumers over 10 years increase from £3.7bn to £4.2bn.  We do not consider that these changes are material to the consideration of the package of remedies. However, to allow open consideration of the impact of the remedies, we have issued an updated version of the consultation paper, having corrected the error in the code. Corresponding changes have also been made to Annex 2 to the market study and one paragraph in the final report of the market study. Changes made in the documents have been highlighted.

Why we are consulting

Our market study found extensive evidence that some firms gradually increase the price to customers who renew with them year on year. This is called price walking.

Firms use complex pricing techniques to identify consumers who are more likely to renew with them. Firms then increase prices to these customers at renewal each year, resulting in some consumers paying very high prices. Many of these consumers are unaware of this, mistakenly believing that their provider is offering them a competitive price at renewal. In addition, some firms use practices that can discourage consumers from shopping around, including by making it more difficult to cancel automatic renewal.

We have also identified wider concerns about product governance and fair value more generally in the insurance market.

We propose a package of remedies to address the identified issues.

We have carefully considered the potential impact of our remedies on a market that continues to be affected by the coronavirus pandemic. We will continue to monitor the market during the consultation period and will consider the ongoing impacts of the pandemic before making any final rules and issuing a Policy Statement.

Who this applies to

This consultation is relevant to firms in the insurance market.

While our focus is primarily on the home and motor insurance markets, we propose to apply some of our remedies to all types of general insurance and pure protection insurance. Some proposals also apply to finance products sold alongside insurance.

Next steps

This consultation has now closed. 

We will consider the feedback received and engage directly with stakeholders on these matters. Subject to the feedback, we aim to publish a Policy Statement (PS) by Q2 2021.

January 2021 update

We recently hosted three online events to discuss the package of remedies. Attendees had the opportunity to submit questions to us, both before and during these events. We have published the slides that were discussed during these events.

The purpose of these slides was to help with the consultation dialogue, and provide answers to some of the pre-submitted questions. The slides should not be taken as giving a definitive view on whether we will implement rules, or how any final rules might apply in practice.

There were a large number of questions asked during the sessions, some of which we were unable to answer due to time constraints. The Q&A document below seeks to answer some of those questions.

Forum 1: Pricing Remedy proposal

Forum 2: Product Governance proposals

Forum 3: Auto-renewal and reporting proposals

Forum events: follow-up Q&A document

Page updates

27/11/2020: Information added November 2020 update with Forum slides.