The Financial Conduct Authority has published a policy statement – PS16/21: Increasing transparency and engagement at renewal in general insurance markets.
In this Policy Statement the regulator is reporting on the main issues arising from Consultation Paper 15/41 – Increasing transparency and engagement at renewal in general insurance markets – and confirming the final rules and non-Handbook guidance.
The rules will most directly impact on firms and consumers in retail general insurance markets. Insurers and intermediaries selling retail general insurance products will be required to implement the new requirements that the FCA has set out.
In December 2015, the FCA consulted on new rules and guidance for general insurance renewals.
These proposals were intended to address concerns about levels of consumer engagement and the treatment of consumers by firms at renewal, and the lack of competition that results from this.
The FCA said it based its proposals on findings from the large-scale randomised controlled trial that it conducted with three firms in the home and motor general insurance markets, as well as its wider research.
The regulator proposed new rules across all personal lines general insurance markets requiring firms to:
- disclose last year’s premium at each renewal
- include text to encourage consumers to check their cover and shop around for the best deal at each renewal
- identify consumers who have renewed with them four consecutive times, and give these consumers an additional prescribed message encouraging them to shop around
In addition, the FCA proposed guidance on how firms can maintain records to demonstrate compliance, including keeping a record of premiums.
The regulator also proposed non-Handbook guidance to help firms meet their obligations towards consumers at renewal. This guidance detailed the importance of providing appropriate information and issuing clear communications to consumers at renewal.
It further addressed how firms should treat consumers who want to switch or cancel, and the appropriateness of fees or charges for cancelling or renewing policies.
The FCA consultation closed in March 2016 and we received 113 responses. This paper sets out the FCA’s response to the feedback we received and also includes the final rules and guidance. The FCA are proceeding with the proposals it has consulted on but have made some changes in response to this feedback.
This includes an alteration to the requirements it proposed so that where a consumer’s circumstances have changed during the course of holding their policy, firms must give an annualised premium reflecting any mid-term adjustments, instead of last year’s premium.
The FCA is requiring firms to make the necessary changes to their renewal communications by 1 April 2017.
