Existing customers should pay no more than new customers for home and motor insurance, according to the financial regulator.
After concluding its market study into the pricing of home and motor insurance, the Financial Conduct Authority (FCA) said it is concerned that these markets are not working well for consumers.
To address this, the watchdog is proposing “significant reform” designed to enhance competition, ensure consumers receive fair value, and increase trust in these markets.
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 their own new business prices, but they would be prevented from gradually increasing the renewal price to loyal consumers over time (known as ‘price walking’) other than in line with changes in customers’ risk.
The FCA is also consulting on other new measures, including:
– Product governance rules requiring firms to consider how they offer fair value to all insurance customers over the longer term.
– Requirements on firms to report certain data sets to the FCA so that it can check the rules are being followed.
– Making it simpler to stop automatic renewal across all general insurance products.
The “radical package” of reforms would put an end to the very high prices paid by some long-standing customers and ensure that firms focus on providing fair value to all their customers, said Christopher Woolard, interim chief executive of the FCA.
In the long term, the proposed remedies are designed to improve competition, leading to lower prices. The FCA estimates that its proposals will save consumers £3.7bn over 10 years.