The FCA has made a rule that it hopes will encourage consumers to shop around before deciding whether to renew a general insurance policy with their existing provider.
In “Consultation Paper 15/41** Increasing transparency and engagement at renewal in the general insurance markets”, the FCA proposed a new rule. If made, that rule would have required an insurer or broker offering a consumer a renewal quote for a general insurance contract that would last for more than 12 months to tell him:
(a) what he paid last year;
(b) that he “should check that the level of cover offered by the renewal is appropriate for [his] needs”; and
(c) that he could “if he so wishe[d] … compare the prices offered by alternative providers“.
If the consumer had already renewed on 4 occasions, the insurer or broker would also be have been required to tell the consumer that “You have been with us for over five years [sic] [and] may be able to save money if you shop around”.
There were many problems with these proposals. We described some of them in our contemporary blog, and those who responded to the FCA’s consultation raised many others. The FCA has accepted some of these criticisms, and adjusted the terms of the final rule so that:
- it applies to policies with a term of at least 10 months, instead of policies with a term of more than 12 months;
- if the expiring policy was adjusted mid-term, the firm is required to give an annualized premium for the adjusted policy, instead of telling the policyholder what he paid last year for the original policy; and
- consumers are encouraged to consider cover when shopping around as well as price.
Firms will be required to comply with the new rule (@ ICOBS 6.1.12A R) from 1 April 2017. The text of that rule, the FCA’s Finalised Guidance “FG16/8 – Improving General Insurance Renewal Practice“; and its detailed response to the criticisms leveled at its original proposals, can be found in FCA Policy Statement “PS16/21 Increasing transparency and engagement at renewal in general insurance markets – feedback on CP15/41 and final rules and guidance“