Firms falling short of renewal expectations

We have identified a range of concerns and are reminding those accountable that they need to ensure that they effectively manage regulatory change.

Our rules are intended to increase transparency and engagement in general insurance renewals. The rules apply when a firm sends a general insurance renewal notice to a consumer. They require firms to:

• disclose last year’s premium at each renewal, so it is easily compared with the new premium offered
• encourage consumers to check their cover and shop around for the best deal at each renewal
• identify consumers who have renewed four or more consecutive times, and give them an additional message encouraging them to shop around
• communicate this information in a way which draws attention

We have been monitoring how firms are implementing the rules. We have seen good practice where firms have made changes to their renewal documentation in line with our rules to help consumers make informed decisions.

We have, however, also seen several examples of firms who have failed to comply fully with the rules. Consumers may have lost out as a result. For example, some firms obscured the required information or did not place the information in a prominent position. This has been observed across smaller and larger firms including both insurers and intermediaries.  

Where we have identified issues, we have worked with the individual firms to address the problems and ensure that customers are given clear messages and are encouraged to shop around. In several cases we have required firms to provide follow-up communications to consumers to clarify their renewal information. Where firms are not prepared to resolve issues voluntarily, we are prepared to take further steps.

Broader concerns

We are concerned that firms were under prepared to implement the renewal transparency rules accurately. We consider these rules to be relatively straightforward. We would remind firms of upcoming regulatory changes such as the Insurance Distribution Directive (IDD)[1] and the Senior Managers and Certification Regime (SM&CR)[2] which are more complex. Under-preparation for major regulatory change is not acceptable. Based on what we have identified, we feel it is important to remind all firms of the need to ensure that regulatory changes are managed effectively in future.

Key findings

The areas where firms have failed to meet the rules fall into four broad categories:

1. Providing incorrect premium information
2. Failing to present the premiums and shopping around message clearly, accurately and in a way which draws the reader’s attention
3. Not implementing the rule changes for all products and customers
4. Failing to properly identify a ‘renewal’ as defined by our rules

1. Providing incorrect premium information

Firms are required to disclose last year’s premium at each renewal so that it can be easily compared to the new premium offered. Consumers must be given a figure that reflects the premium they paid previously. We identified that firms did not always take into account prior discounts (either introductory or ‘premium holidays’) or mid-term adjustments when providing these figures. Some firms did not present fees clearly and consistently across both years which made it difficult for consumers to make a clear comparison.

2. Presentation

In our Policy Statement (PS16/21[3]) we said that the premium and shopping around information must be presented clearly, accurately and in a way which draws attention. We also explained that we expected firms to take into account our original consumer trials, which showed that disclosure is most effective when on the front page of the renewal notice.

We saw a number of examples where firms did not give sufficient prominence to the premium comparison and shopping around message. This included a monthly premium being highlighted on page one, with the transparency information displayed later in the documentation and with less prominence.

Firms are required to include wording in their renewal documentation that encourages consumers to shop around and enables consumers, if they so wish, to compare the prices and levels of cover offered by alternative providers. From the fourth renewal onwards, a prescribed message must be included.

We identified several examples where the prescribed wording was missing, or firms had included additional wording that could be seen to be discouraging consumers from shopping around. We also identified examples of intermediaries including wording to suggest they had done a consumer’s shopping around for them.  This is likely to discourage consumers from shopping around, and may also be inaccurate and misleading, particularly where intermediaries dealt with only a small panel of insurers or had not undertaken a full review of the renewal.

3. Failing to implement changes for all customers

We identified a significant number of technical issues across both insurers and intermediaries where changes to IT systems had simply failed to implement the changes required by the new rules. Firms had failed to include all necessary changes in their IT updates. These related mainly to niche books of business or legacy systems that had not been included but, in some cases, they had been overlooked in change programs.

4. Definition of a 'renewal'

We identified some cases where firms had proposed a renewal, but had internally referred to this as an 'expiry' or 're-broking' notice and not provided the transparency information.

We remind firms that ‘renewal’ is defined broadly under our rules. A ‘renewal’ means carrying forward a policy, at the point of expiry and as a successive or separate operation of the same nature and duration as the policy, with the same insurance intermediary or the same insurer.

Next steps

We expect firms to review their current processes and documentation (both direct to consumer and on-line) to ensure they are compliant and have captured all necessary renewals.

We remind firms that they are required to ensure that the last year’s premium and additional shopping around messages are presented as key information in a clear prominent position and in a way which draws attention.

We will continue to monitor compliance to ensure the effective implementation of our rules with a view to taking appropriate action where this is not the case.