The Financial Conduct Authority (FCA) has published policy statement PS16/21 – Increased transparency at renewal in general insurance markets – feedback on CP15/41 and final rules and guidance. CP15/41 was published in December 2015. It proposed new rules and guidance to address concerns about consumer engagement on renewal of policies and poor treatment. In particular the FCA was concerned that long-standing policyholders were paying more than new customers and wanted to find means by which customers could be given information about the cost of renewal and options for shopping around.
What was proposed in CP16/21?
Following a large-scale randomised trial conducted with three firms in the motor and GI markets, the FCA proposed new rules to require firms to:
- disclose the customer’s last premium at each renewal;
- include text in renewal letters to encourage customers to check their cover and shop around for the best deal at each renewal; and
- identify consumers who have renewed with the firm four consecutive times and give them a prescribed message to encourage shopping around for a new policy.
In addition, the FCA has proposed guidelines on how best to maintain records to demonstrate compliance – including keeping records of premium. The FCA has also proposed non-Handbook guidance (FG16/8 – Improving General Insurance Renewal Practices) to assist firms meet their obligation towards consumers at renewal and to help customers switch or cancel.
Has the FCA made any changes following consultation?
Following consultation, the FCA has decided to alter some of its proposals, with effect that:
- Where a consumer’s circumstances have changed during the course of their policy (for example, a motor policyholder has changed their car) insurers must give an annualised premium reflecting any mid-term adjustments instead of provided last year’s premium; and
- Group policies are not included in these proposals as the measures only cover situations where the renewal is directly conducted with the consumer.
The FCA has extended the implementation deadline by three months with the result that the disclosure are required from 1 April 2017. Firms should begin to put procedures into place to have access to premium information and change systems to ensure that renewal notices will meet the new disclosure rules by April next year. In accordance with ICOBS 6.1.1 insurers are responsible for producing and intermediaries providing the disclosures.