The Financial Conduct Authority (FCA) has proposed mandating new tactics designed to help consumers shop around for insurance.
The finance and insurance regulator has published proposals to require general insurance providers to publish details of last year’s premium on renewal notices.
The proposals aim to address concerns that some consumers pay higher prices if they stay with the same insurer, particularly for a long period of time.
The FCA has found evidence of low levels of consumer engagement, switching, and a lack of competition when some types of insurance policies are renewed.
Christopher Woolard, director of strategy and competition at the FCA, said: “We hope the proposals encourage more people to shop around for the best product for them. It is important that insurers give their customers the information they need to do this and ensure they’re treating their customers fairly.”
In 2014, the FCA launched a large scale randomised, controlled trial with over 300,000 consumers across the UK to test reactions to different types of information provided at renewal and whether this prompted people to switch.
The inclusion of last year’s premium on renewal notices had the greatest impact, prompting between 11% and 18% of people to either switch provider or negotiate a lower premium when prices sharply increase.
The FCA also tested three other disclosure options - simplified renewal notices that reinforced key messages such as the right to cancel and switch; sending shopping around leaflets with renewal letters; and reminders sent through different media, including email, letter and text message
In addition to requiring firms to disclose last year’s premium on renewal notices, the FCA is also proposing:
- firms to identify and specifically prompt those consumers who have renewed the same product four times or more to encourage them to engage;
- guidance on how firms can improve their processes around renewals to deliver greater clarity and better outcomes for consumers;
- and guidance that firms maintain records of past premiums.
The FCA is also reminding firms of their obligations to treat customers fairly, and to consider how their approach to renewal pricing in general, and the treatment of long-standing customers in particular, delivers fair outcomes to consumers.
The FCA is seeking feedback on its proposals by 4 March 2016.