FCA market study on pricing practices: Summary of proposed remedies

October 7, 2019

On Friday 4 October the FCA published its proposed remedies to address pricing practices in the UK personal lines insurance market. Make sure to read our summary of the report and analysis of the proposals.

This blog post summarises the 11 remedies that are implied in the report, categorised by the three stated objectives.

Objective 1: Remedies to tackle high prices for consumers who do not switch or negotiate better deal

1. Restrictions on price increases to renewing customers
2. Restrictions on the use of particular factors in setting prices and determining margins, for example the consumers’ likelihood of switching or negotiating a better deal
3. Restrictions on the price level relative to a benchmark such as the new business price for the policy
4. Requiring firms to move consumers on to cheaper equivalent deals… these consumers could be switched to the price (and level of cover) offered to an equivalent new customer with the same insurers
5. Require firms to engage with customers who have renewed the same policy consistently and who are paying high prices

Objective 2: Remedies to tackle practices that discourage switching

In relation to auto-renewals:

1. A ban or restriction on the use of auto-renewal of insurance policies, including where there has been a change in the price.
2. Making auto-renewal opt-in only
3. Making it easy to decline auto-renewing policies at the time of purchase and at renewal
4. Ensuring that firms make it as easy to exit a contract as it was to sign up

Objective 3: Remedies to make firms be clearer and more transparent in their dealings with consumers

1. Requiring firms to make it clear to consumers that renewal prices have increased because they have not switched for a number of years. This could also include requirements for firms not to use statements that could discourage consumers from switching
2. Requiring firms to publish information about their pricing practices or differences in prices between customers of equivalent risk

Make sure to read more of our commentary of the FCA’s research.