In this Policy Statement we report on the main issues arising from Consultation Paper 15/41 - Increasing transparency and engagement at renewal in general insurance markets - and confirm the final rules and non-Handbook guidance.
Increasing transparency and engagement at renewal in general insurance markets (PS16/21) (PDF, 38 pages)
In December 2015, we consulted on new rules and guidance for general insurance renewals.
These proposals were intended to address concerns about levels of consumer engagement and the treatment of consumers by firms at renewal, and the lack of competition that results from this.
We based our proposals on findings from the large-scale randomised controlled trial that we conducted with three firms in the home and motor general insurance markets, as well as our wider research.
We proposed new rules across all personal lines general insurance markets requiring firms to:
- disclose last year’s premium at each renewal
- include text to encourage consumers to check their cover and shop around for the best deal at each renewal
- identify consumers who have renewed with them four consecutive times, and give these consumers an additional prescribed message encouraging them to shop around
Alongside this, we proposed guidance on how firms can maintain records to demonstrate compliance, including keeping a record of premiums.
We also proposed non-Handbook guidance to help firms meet their obligations towards consumers at renewal. This guidance detailed the importance of providing appropriate information and issuing clear communications to consumers at renewal.
It further addressed how firms should treat consumers who want to switch or cancel, and the appropriateness of fees or charges for cancelling or renewing policies.
Our consultation closed in March 2016 and we received 113 responses. This paper sets out our response to the feedback we received and also includes the final rules and guidance. We are proceeding with the proposals we have consulted on but have made some changes in response to this feedback.
This includes an alteration to the requirements we proposed so that where a consumer’s circumstances have changed during the course of holding their policy, firms must give an annualised premium reflecting any mid-term adjustments, instead of last year’s premium.
Who this applies to
Our rules will most directly impact on firms and consumers in retail general insurance markets. Insurers and intermediaries selling retail general insurance products will be required to implement the new requirements that we set out.
We expect our proposals to improve outcomes for consumers who have a general insurance policy. Our requirements will prompt more consumers to shop around at renewal and will make price increases at renewal more transparent.
We are requiring firms to make the necessary changes to their renewal communications by 1 April 2017.
We have developed these rules and guidance in the context of the existing UK and EU regulatory framework. We will keep the policy under review to assess whether any amendments will be required due to changes in the UK regulatory framework, including as a result of any negotiations following the UK’s vote to leave the EU. We expect firms to implement changes unless we issue a communication to state that we are altering the requirements.