The FCA has released its Policy Statement PS21/5: General insurance pricing practices market study which implements a package of remedies to improve competition and protect home and motor insurance customers. The remedies include removing the ability to create different prices at renewal when compared with the price for a new customer (the so-called ‘loyalty penalties’ and ‘price-walking’). This will stop the use of sophisticated processes to target higher prices at customers who firms think will not switch in the future and will therefore pay more.
In addition to the new rules on pricing for home and motor insurance, the FCA is also bringing in new rules to:
- Give most consumers easier methods of cancelling the automatic renewal of their policy
- Require insurance firms to do more to consider how they offer fair value to their customers
- Require home and motor insurance firms to report data to the FCA so that it can supervise the market more effectively
The pricing, auto-renewal and data reporting remedies come into effect on 1 January 2022. The rules on systems and controls, product governance and premium finance take effect from the end of September 2021.
The FCA will continue to monitor the market closely to ensure firms are ready to implement the pricing changes on time. The FCA will also review the effects of the remedies over the course of 2022, ahead of a full evaluation in early 2024.
UKGI will be refreshing the guidance provided in its series of Bulletins in relation to the new pricing remedies. Firms will need to start to act now to be able to meet the deadlines, particularly (for insurance brokers) those relating to premium finance.
If you have any questions, or require any support, regarding the implementation of the new requirements, please contact us on 01925 767888 or by contacting PS21/5: General insurance pricing practices market study.