New rules came into effect on 1 April 2017 to increase transparency and engagement in the general insurance market which were set out in FCA Policy Statement PS16/21.
There are two main elements to the regulation. Firstly, to provide an instant comparison for policyholders of the cost of their renewal compared against last year’s premiums. Insurers and intermediary firms must give an annualised premium reflecting any mid-term adjustments, instead of last year’s premium. Where there has been no mid-term adjustment, firms must still show last year’s premium.
Secondly, renewal notices must include ‘shopping around’ messages. In years one to three the FCA requires both insurers and intermediaries to include a shopping around notice, suggesting “Have you checked that your insurance cover still meets your needs? Have you considered shopping around to find the best deal for the cover you want?” as an example. However, in year four onwards the shopping around message is in a prescribed format.
The prescribed wording is: “You have been with us for a number of years. You may be able to get the insurance cover you want at a better price if you shop around.”
The FCA encouraged firms to display notices on the front page of their renewal notices as their research showed this was where the premium comparison and shopping around notices were most effective, although they stopped short of making this mandatory.
Twelve months on, a recent statement from the FCA confirms some firms are not complying with the premium comparison requirements which will prompt them to take further action.
The FCA regulation was intended to address three elements around transparency in general insurance renewals. The levels of consumer engagement at policy renewal, ways to improve the treatment of consumers and measures to promote effective competition in the market
Has it done that? Yet again the healthcare sector is being impacted by an FCA broad-brush approach to general insurance business. The premium comparison problem exists in the household and motor sectors where sadly, some insurers take advantage of loyal existing consumers in their renewal premiums.
However, healthcare is being negatively impacted. The ‘shopping around’ notices are just an extension of the problem. The FCA should have issued firms with a single ‘shopping around’ statement and told them where they wanted it posted in renewal documentation.
The current arrangement is neither helpful to consumers or firms. If a customer has been with Insurer A for a period of six years but only used Broker B as their appointed intermediary for two years, they would receive both of the shopping around notices, a situation which only serves to confuse. In addition, it is a nightmare for insurers and intermediaries to police. Why didn’t the FCA instead issue a single statement wording, and say it must be displayed on one of the first two pages of your renewal invitation. It could have opted for something straighforward such as: “Have you checked that your insurance cover still meets your needs? Have you considered shopping around as you may be able to get the cover you want at a better price?” That would deliver simplicity and consistency.
I have a problem with the shopping around notice as a general principle because it places cost above value, which I consider a dangerous precedent. No one ever says: “We can sell you cheaper but worse!”
I want an FCA that is proudly the protector of the consumer, but one that does not place an unnecessary burden upon member firms. Sometimes they lose sight of that.