The Association of British Insurers (ABI) announced in a press release on July 10 that it has written to the Financial Conduct Authority (FCA) proposing an initiative to further improve clarity for customers when renewing and taking out motor and home insurance.
The ABI proposes a new minimum standard of information applying across the market. Under the ABI’s proposal, renewal documents should include the premium that the customer started the year paying alongside the renewal quote. In addition, policy documents for new customers should include a clear explanation that any introductory discounts which may have applied to new customers may not apply when the policy is due for renewal.
This initiative is proposed only in relation to home and motor insurance on the basis that these are the most widely held annually renewable policies and the most competitive in terms of prices and number of providers. The ABI believes this initiative would ‘significantly improve transparency for millions of customers’ and would like its proposal to apply to all distribution channels i.e. insurance purchased direct from an insurer, through a broker, bank, retailer and price comparison website.
The ABI will be discussing its proposal with the FCA and, if adopted, it anticipates there would be an 18 month implementation period requiring ‘major system changes by the many different providers in the market’. The FCA is already conducting research into how information is presented in renewal letters and will report back on its work next year. Should the ABI’s proposal be taken forward, firms can expect changes to the regulatory requirements. Firms writing home and motor insurance should keep track of these developments and, in the meantime, consider whether any steps can be taken to improve transparency in the renewal process.