FCA to force insurers to show renewal price hikes
Insurance companies may be forced to include details of last year’s premiums for insurance renewals, under proposals being considered by the Financial Conduct Authority (FCA).
This would address concerns that some consumers face much higher insurance costs if they stay with the same insurer, particularly for if they do so for several years.
Research by Moneysupermarket.com earlier this year indicated that 23% of drivers automatically renew their policy, and people who stay with their insurer for a couple of years typically receive quotes that are £113 higher than those who shop around.
The FCA’s own research found that forcing insurers to show people what they previously paid, alongside the current quote, is the most effective way to encourage people to shop around or negotiate a lower premium. Its plans include extra measures for renewals where the customer has held a policy for four years or more.
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.”
Personal finance expert Andrew Hagger welcomed the plans, saying: “This change is well overdue but it's disappointing that it has been down to the regulator to have to force this through – it's basic transparency and information that customers should have already been receiving as a matter of course.
“Hopefully this move will shake up some of the less competitive insurers and drive down the cost of cover, whilst the ability to see price increases in black and white will undoubtedly prompt greater levels of switching.”
The FCA also considered other ‘nudges’ to encourage shopping around for cheaper policies, including simplified renewal notices that emphasised the right to cancel or switch, shopping around leaflets to accompany renewal letters and reminders sent via social media.
If you have been affected by massive hikes to your premiums, the regulator is requesting input to its plans until 4 March 2016. Visit fca.org.uk for further details.