The Financial Conduct Authority (FCA) has published its 31-page final report on the regulator’s general insurance pricing practices market study. Accompanying it is a consultation paper, which further explains the FCA’s proposed remedies.
In a release this morning, the watchdog noted: “The FCA is proposing that when a customer renews their home or motor insurance policy, they pay no more than they would if they were new to their provider through the same sales channel. For example, if the customer bought the policy online, they would be charged the same price as a new customer buying online.
“Firms would be free to set new business prices, but they would be prevented from gradually increasing the renewal price to consumers over time (known as ‘price walking’) other than in line with changes in customers’ risk. For existing consumers, their renewal price would be no higher than the equivalent new business price.”
The proposal essentially removes the so-called loyalty penalty.
Other proposed measures aimed at further boosting competition and delivering fair value to policyholders include product governance rules, reporting requirements, and making it simpler to stop automatic policy renewals.
“We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers,” said FCA interim chief executive Christopher Woolard. “The package would also ensure that firms focus on providing fair value to all their customers. We welcome feedback on the proposals.”
Responses can be submitted until January 25, 2021. Meanwhile a policy statement and new rules are expected to be published next year.