FCA announces the levelling up of premiums for new and renewal customers: What will the changes mean for insurers?
The Financial Conduct Authority (FCA) has announced it is levelling up premiums for new and renewal customers. The FCA is introducing rules to improve the way general insurance markets function.
The rules are specifically aimed at ensuring that renewing home and motor insurance customers are quoted prices that would not exceed the prices they would be quoted as a new customer through the same channel.
The FCA is also making it easier for customers to stop automatic renewals if they wish to do so. On top of the changes designed to make insurance renewal practices fairer for customers, the conduct regulator is also introducing new product governance rules to ensure that insurers deliver fair value on all their products.
Commenting on the new rules, Sheldon Mills, Executive Director, Consumers and Competition at the FCA, said: “These measures will put an end to the very high prices paid by many loyal customers. Consumers can still benefit from shopping around or negotiating with their current provider – but won’t be charged more at renewal just for being an existing customer.
“We are making the insurance market work better for millions of people. We will be watching closely to see how the market develops in the future and to ensure firms continue to deliver fairer value to consumers,” Mills added.
Who do the changes apply to?
The FCA’s levelling up of premiums for new and renewal customers applies to a broad spectrum of insurers and insurance products, including:
- General insurers and intermediaries
- Life assurers and intermediaries selling pure protection business
- Trade bodies representing these firms
- Consumers and consumer organisations
What will it mean for insurers going forward?
Insurers need to be aware of the changes and mindful of when the new rules are being introduced. On October 1, 2021, the systems and controls, product governance, premium finance provisions and related glossary changes will come into force.
One January 1, 2022, the pricing and auto-renewal remedies, reporting requirements, and related glossary and administrative charges will be implemented.
Insurers will have until January 17, 2022, to initiate the pricing and auto renewal disclosure remedies in full.
As of January 1, 2022, insurers must pay redress of make repayments to people if the delay to implementing negatively impacts them.
The changes are aimed at creating greater transparency within the household and motor insurance markets.
The FCA estimates that the new rules will mean it is likely that insurers will no longer be able to offer unsustainably low-priced deals to new customers.
The changes to the rules regarding the cost of new and renewal household insurance for customers highlights the importance of having the right residential insurance in place.
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