The FCA has implemented a package of remedies to address problems identified in its market study looking at pricing practices in home and motor insurance markets. "Price walking”, a practice which means that existing customers can pay considerably more at renewal of their policies than new customers for the equivalent cover, will be prohibited.
Other remedies:
- extend existing product governance rules to all general insurance and pure protection products regardless of when they were manufactured and introduce new rules requiring firms to ensure their products offer “fair value”;
- address barriers to switching in contracts that are set to auto-renew; and
- introduce new reporting requirements in home and motor insurance.
The new rules (PS21/5) follow the FCA's September 2020 consultation (CP20/19) (see our earlier blog post) and its final report on general insurance pricing practices (MS18/1.3). They are intended to support other work being undertaken by the FCA to ensure that general insurance markets "work well" for customers, including its recent consultation on a new Consumer Duty (CP21/13) and guidance for firms on the fair treatment of vulnerable customers (FG21/1).
In September, the FCA indicated that any new rules would come into force four months after publication of its Policy Statement. On 23 March 2021, the FCA announced that rules related to product governance, systems and controls and retail premium finance would need to be implemented by firms by the end of September 2021. Firms would have until the end of 2021 to implement rules on pricing, auto-renewal and reporting. The FCA has warned that it will be checking on firms' progress and will consider action if it discovers that firms have not taken sufficient steps to meet these deadlines. This may include requiring firms to remedy any financial loss caused to customers by late implementation.
Our “at a glance” guide (which can be found here) provides a summary of the final rules, as well as guidance for insurers on achieving "fair value" for consumers.
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