Increasing transparency and engagement at renewal in general insurance markets
In December 2015, the FCA 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.
They based their proposals on findings from the large-scale randomised controlled trial that they conducted with three firms in the home and motor general insurance markets, as well as our wider research.
The FCA 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, the FCA proposed guidance on how firms can maintain records to demonstrate compliance, including keeping a record of premiums.
They 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.
The next steps...
The FCA are requiring firms to make the necessary changes to their renewal communications by 1st April 2017.
The FCA have developed these rules and guidance in the context of the existing UK and EU regulatory framework and 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. They expect firms to implement changes unless they issue a communication to state that they are altering the requirements.